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

Question

Fit & Slim is a health club that offers members various gym services. F&S accounts reports under the ASU. 1. Assume F&S offers a deal whereby enrolling in a new membership also entitles the member to receive a voucher redeemable for 25 percent off a year’s worth of premium yoga classes. A new membership costs $2,200, and a year’s worth of premium yoga costs an additional $2,000. F&S estimates that approximately 35 percent of the vouchers will be redeemed. F&S offers a 15 percent discount on all courses as part of its seasonal promotion strategy. b. What amount of the transaction price would you allocate to the discount voucher on yoga course? (Round your answer to 2 decimal places.) c. Prepare the journal entry to recognize revenue for the sale of a new membership. Clearly identify revenue or unearned revenue associated with each distinct performance obligation. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Round your answers to 2 decimal places.) 2. Assume F&S offers a “Fit 50” coupon book with 135 prepaid visits over the next year. F&S has learned that Fit 50 purchasers make an average of 125 visits before the coupon book expires. A customer purchases a Fit 50 book by paying $670 in advance, and for any additional visit over 135 during the year after the book is purchased, the customer can pay a $28 fee visitation fee. Depending on the season, F&S typically charges between $25 and $31 to nonmembers who wish to work out on a single day. b. What amount of the transaction price would you allocate to separate performance obligations? c. Prepare the journal entry to recognize revenue for the sale of a new Fit 50 book. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)

Explanation / Answer

Part 1

Part 2

in this case the advance amount received is $670 for 135 visits. This is recognized when the book expires.

the transaction price allocated would be $670

Journa entry

Yoga class Premium Cost of new membership $    2,200 $4,200 Discount of membership 15% 15% Discount of membership $       330 $   630 Net cost of membership $    1,870 $3,570 Journal entry Cash $    1,870 Discount on membership $       330                       Deferred revenue $2,200 Sold member ship Deferred revenue $    2,200                       Service income $2,200 For premium Cash $    3,570 Discount on membership $       630                       Deferred revenue $4,200 Sold member ship Deferred revenue $    4,200                       Service income $4,200

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