Circuit Fitness (CF) sells treadmills and other related exercise equipment. CF offers customers the following purchase options: 1) purchase a treadmill including a one year basic warranty or 2) purchase a treadmill including the one year basic warranty and an extended 2 year warranty (total of 3 years for warranty coverage). The standalone pricing of the treadmill with the base one year warranty is $1,400 and the standalone pricing of the extended two years warranty is $250. Assume on October 1st, 2021 CF entered into a contract with a customer to sell one treadmill with the extended two year warranty for a total sales price of $1,600. CF receives payment from the customer for the treadmill with an extended two year warranty on October 4th, 2021. The treadmill is delivered by CF on October 8th, 2021. The warranty is initiated at that time as well by CF. Circuit Fitness’s fiscal year is January 1- December 31. Apply the requirements of ASC 606; Revenue From Contracts with Customers to this case. For each of the five steps fully explain all of the requirements as they apply to the case.
Circuit Fitness (CF) sells treadmills and other related exercise equipment. CF offers customers the following purchase options: 1) purchase a treadmill including a one year basic warranty or 2) purchase a treadmill including the one year basic warranty and an extended 2 year warranty (total of 3 years for warranty coverage). The standalone pricing of the treadmill with the base one year warranty is $1,400 and the standalone pricing of the extended two years warranty is $250.
Assume on October 1st, 2021 CF entered into a contract with a customer to sell one treadmill with the extended two year warranty for a total sales price of $1,600. CF receives payment from the customer for the treadmill with an extended two year warranty on October 4th, 2021.
The treadmill is delivered by CF on October 8th, 2021. The warranty is initiated at that time as well by CF. Circuit Fitness’s fiscal year is January 1- December 31.
Apply the requirements of ASC 606; Revenue From Contracts with Customers to this case. For each of the five steps fully explain all of the requirements as they apply to the case.
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