Performance obligation: Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract. Transaction price: Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows: Variable amount of consideration and the restriction on its recognition. Rights for sales return Whether the seller is acting as a principle or an agent Time value of money Payments by the seller to the customer Deferred revenues: Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned. Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities. Credit , all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. To determine: The number of performance obligations exist in the new member deal.

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Answer 1

Question

Chapter 6, Problem 6.1P

(1), (a)

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations exist in the new member deal.

(1), (b)

To determine

The amount of contract price allocated to each performance obligation.

(1), (c)

To determine

To prepare: The journal entry for F&S.

(2), (a)

To determine

The number of performance obligations exist in the Fit 50 member.

(2), (b)

To determine

The amount of contract price allocated to each performance obligation.

(2), (b)

To determine

To prepare: The journal entry for F&S.

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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 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 $1,470, and a one-year enrollment in yoga classes sells for an additional $400. F&S estimates that approximately 50% 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…

1) Part 2 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 30% 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 $1,080, and a one-year enrollment in yoga classes sells for an additional $450. F&S estimates that approximately 50% 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. 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 $450 in advance, and for any additional visits…

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 $1,250 provides a year of unlimited access to facilities and also entitles the member to receive a voucher redeemable for 30% 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 $1,320, and a one-year enrollment in yoga classes sells for an additional $550. F&S estimates that approximately 50% 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. Assume F&S offers a “Fit…

Answer 2

Question

Chapter 6, Problem 6.1P

(1), (a)

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations exist in the new member deal.

(1), (b)

To determine

The amount of contract price allocated to each performance obligation.

(1), (c)

To determine

To prepare: The journal entry for F&S.

(2), (a)

To determine

The number of performance obligations exist in the Fit 50 member.

(2), (b)

To determine

The amount of contract price allocated to each performance obligation.

(2), (b)

To determine

To prepare: The journal entry for F&S.

Expert Solution & Answer

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Answer 3

Question

Chapter 6, Problem 6.1P

(1), (a)

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations exist in the new member deal.

(1), (b)

To determine

The amount of contract price allocated to each performance obligation.

(1), (c)

To determine

To prepare: The journal entry for F&S.

(2), (a)

To determine

The number of performance obligations exist in the Fit 50 member.

(2), (b)

To determine

The amount of contract price allocated to each performance obligation.

(2), (b)

To determine

To prepare: The journal entry for F&S.

Expert Solution & Answer

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Answer 4

Question

Chapter 6, Problem 6.1P

(1), (a)

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations exist in the new member deal.

(1), (b)

To determine

The amount of contract price allocated to each performance obligation.

(1), (c)

To determine

To prepare: The journal entry for F&S.

(2), (a)

To determine

The number of performance obligations exist in the Fit 50 member.

(2), (b)

To determine

The amount of contract price allocated to each performance obligation.

(2), (b)

To determine

To prepare: The journal entry for F&S.

Expert Solution & Answer

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Answer 5

Chapter 6, Problem 6.1P

(1), (a)

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations exist in the new member deal.

(1), (b)

To determine

The amount of contract price allocated to each performance obligation.

(1), (c)

To determine

To prepare: The journal entry for F&S.

(2), (a)

To determine

The number of performance obligations exist in the Fit 50 member.

(2), (b)

To determine

The amount of contract price allocated to each performance obligation.

(2), (b)

To determine

To prepare: The journal entry for F&S.

Answer 6

Chapter 6, Problem 6.1P

(1), (a)

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations exist in the new member deal.

Answer 7

Chapter 6, Problem 6.1P

(1), (a)

To determine

Performance obligation:

Performance obligation is the promise made by the seller to supply the goods and service to the customer on or before the contract.

Transaction price:

Transaction price refers to the price that is paid at the time of delivery or after delivery of goods and/or services. Specific situations affecting the transaction price are as follows:

Variable amount of consideration and the restriction on its recognition.

Rights for sales return

Whether the seller is acting as a principle or an agent

Time value of money

Payments by the seller to the customer

Deferred revenues:

Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an adjusting entry. Unearned revenue is also known as deferred revenues, because at the receiving of payment in advance, revenues are not recognized but deferred until they are earned.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To determine: The number of performance obligations exist in the new member deal.

Answer 8

(1), (b)

To determine

The amount of contract price allocated to each performance obligation.

Answer 9

(1), (b)

To determine

The amount of contract price allocated to each performance obligation.

Answer 10

(1), (c)

To determine

To prepare: The journal entry for F&S.

Answer 11

(1), (c)

To determine

To prepare: The journal entry for F&S.

Answer 12

(2), (a)

To determine

The number of performance obligations exist in the Fit 50 member.

Answer 13

(2), (a)

To determine

The number of performance obligations exist in the Fit 50 member.

Answer 14

(2), (b)

To determine

The amount of contract price allocated to each performance obligation.

Answer 15

(2), (b)

To determine

The amount of contract price allocated to each performance obligation.

Answer 16

(2), (b)

To determine

To prepare: The journal entry for F&S.

Answer 17

(2), (b)

To determine

To prepare: The journal entry for F&S.

Answer 18

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Answer 19

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Answer 20

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Answer 21

Ch. 6 - What are the five key steps a company follows to...Ch. 6 - What indicators suggest that a performance...Ch. 6 - What criteria determine whether a company can...Ch. 6 - We recognize service revenue either at one point...Ch. 6 - What characteristics make a good or service a...Ch. 6 - Prob. 6.6Q Ch. 6 - What must a contract include for the contract to...Ch. 6 - How might the definition of probable affect...Ch. 6 - When a contract includes an option to buy...Ch. 6 - Prob. 6.10Q

Concept explainers

The amount of contract price allocated to each performance obligation.

To prepare: The journal entry for F&S.

The number of performance obligations exist in the Fit 50 member.

The amount of contract price allocated to each performance obligation.

To prepare: The journal entry for F&S.

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Chapter 6 Solutions