Question

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 $1,300 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.

1. 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 60” coupon book with 60 prepaid visits over the next year. F&S has learned that Fit 60 purchasers make an average of 50 visits before the coupon book expires. A customer purchases a Fit 60 book by paying $750 in advance, and for any additional visits over 60 during the year after the book is purchased, the customer can pay a $20 visitation fee per visit. F&S typically charges $20 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 60 book.

	Item Description Performance Obligation? Stand Alone Prices Percentage of Total Stand Alone Prices Yoga discount voucher Yes 0 Facilities access Yes 0 Total stand alone price $0 0% Item Description Percentage of Total Stand Alone Price Total Transaction Price Allocated Contract Price Yoga discount voucher $0 Facilities access $0 Total contract price $0

Journal entry worksheet

Note: Enter debits before credits.

	Transaction General Journal Debit Credit 1

	Item description Performance Obligation? Stand Alone Prices Percentage of Total Stand Alone Prices Fit 60 0 Additional gym visits 0 Total stand alone price $0 0% Item description Percentage of Total Stand Alone Price Total Transaction Price Allocated Contract Price Fit 60 $0 Additional gym visits $0 Total contract price $0

Journal entry worksheet

Note: Enter debits before credits.

	Transaction General Journal Debit Credit 1

Answer 1