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 $950 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 $980, 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.

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 40” coupon book with 40 prepaid visits over the next year. F&S has learned that Fit 40 purchasers make an average of 30 visits before the coupon book expires. A customer purchases a Fit 40 book by paying $500 in advance, and for any additional visits over 40 during the year after the book is purchased, the customer can pay a $10 visitation fee per visit. F&S typically charges $10 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 40 book.

Answer 1

Please find below spreadsheet useful in order to find the desired results: -