Problem 5-1 Upfront fees; performance obligations [LO5-4, 5-5]

Fit & Slim (F&S) is a health club that offers members various gym services. Required: 1. Assume F&S offers a deal whereby enrolling in a new membership for $1,000 provides a year of unlimited access to facilities and also entitles the member to receive a voucher redeemable for 20% 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 $1,470, and a one-year enrollment in yoga classes sells for an additional $750. 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. a. & b. Indicate below whether each item is a separate performance obligation. For each separate performance obligation you have indicated, allocate a portion of the contract price. c. Prepare the journal entry to recognize revenue for the sale of a new membership. 2. 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 $750 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. a. & b. Indicate below whether each item is a separate performance obligation. For each separate performance obligation you have indicated, allocate a portion of the contract price. c. Prepare the journal entry to recognize revenue for the sale of a new Fit 50 book.

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Complete this question by entering your answers in the tabs below. Req 1A and 1B Req 2A and 2B Req 1C Req 2C Indicate below whether each item is a separate performance obligation. For each separate performance obligation you have indicated, allocate a portion of the contract price. Percentage of Total Stand Alone Prices Performance Item Description Stand Alone Prices Obligations? Yoga discount voucher Gym membership Total stand alone price C 0 0 0% Percentage of Total Stand Alone Price Total Transaction Price Allocated Contract Price Item Description Yoga discount voucher Gym membership Total contract price 0 0 0 Req 1C Req 1A and 1B Prepare the journal entry to recognize revenue for the sale of a new membership. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 Record the revenue for the sale of a new membership Note: Enter debits before credits. Transaction General Journal Debit Credit 1 Complete this question by entering your answers in the tabs below Req 1A and 1B Req 2A and 2B Req 1C Req 2C Indicate below whether each item is a separate performance obligation. For each separate performance obligation you have indicated, allocate portion of the contract price.. a Percentage of Total Stand Alone Prices Performance Item description Stand Alone Prices Obligations? Fit 50 0 Additional gym visits Total stand alone price 0 0% Percentage of Total Stand Total Transaction Price Allocated Contract Price Item description Alone Price Fit 50 Additional gym visits 0 Total contract price Req 2C Req 1C Prepare the journal entry to recognize revenue for the sale of a new Fit 50 book. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 Record the revenue for the sale of a new Fit 50 book Note: Enter debits before credits. Credit Transaction General Journal Debit 1