Fit & Slim (F&S) is a health club that offers members various gym services.

Required:

Assume F&S offers a deal whereby enrolling in a new membership for $700 provides a year of unlimited access to facilities and also entitles the member to receive a voucher redeemable for 25% off yoga classes for one year. The yoga classes are offered to gym members as well as to the general public. A new membership normally sells for $720, and a one-year enrollment in yoga classes sells for an additional $500. F&S estimates that approximately 40% of the vouchers will be redeemed. F&S offers a 10% discount on all one-year enrollments in classes as part of its normal promotion strategy.

How many performance obligations are included in the new member deal?

How much of the contract price would be allocated to each performance obligation? Explain your answer.

Prepare the journal entry to recognize revenue for the sale of a new membership. Clearly identify revenue or deferred revenue associated with each performance obligation.

Assume F&S offers a Fit 50 coupon book with 50 prepaid visits over the next year. F&S has learned that Fit 50 purchasers make an average of 40 visits before the coupon book expires. A customer purchases a Fit 50 book by paying $500 in advance, and for any additional visits over 50 during the year after the book is purchased, the customer can pay a $15 visitation fee per visit. F&S typically charges $15 to nonmembers who use the facilities for a single day.

How many separate performance obligations are included in the Fit 50 member deal? Explain your answer.

How much of the contract price would be allocated to each separate performance obligation? Explain your answer.

Prepare the journal entry to recognize revenue for the sale of a new Fit 50 book.