1. A fitness club gives a free month after they have paid for eleven months. Approximately half of their clients remain with the club long enough to take advantage of this offer.

Required:

1. Define the term liability. Then explain whether the free month offer results in a liability for a fitness club.
2. Explain what makes the liability current. Then explain whether the free month offer results in a current liability for the fitness club.
3. Define the term contingent liability, then explain whether the free month offer results in a contingent liability for the fitness club.