FUNDAMENTALS OF FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781260584486
Author: PHILLIPS
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 3, Problem 1ME
Identifying Performance Obligations
Lakeside Indoor Tennis Club (LITC) sells a tennis membership for $2,400 per year, which entitles members to 50 “free” court bookings. The price for nonmembers is $40 per court booking. LITC’s membership also allows members to participate in a competitive league without charge, whereas nonmembers pay a league fee of $500. How many different types of performance obligations exist for LITC when it sells a tennis membership?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Required:1. Assume F&S offers a deal whereby enrolling in a new membership for $1,500 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 $1,560, and a one-year enrollment in yoga classes sells for an additional $650. 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.
Need Parts Req 1A&1b, Req 1c
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.
1. Assume F&S offers a deal whereby enrolling in a new membership for $700 provides a year of unlimitedaccess to facilities and also entitles the member to receive a voucher redeemable for 25% off yoga classes forone year. The yoga classes are offered to gym members as well as to the general public. A new membershipnormally sells for $720, and a one-year enrollment in yoga classes sells for an additional $500. F&S estimatesthat 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.a. How many performance obligations are included in the new member deal?b. How much of the contract price would be allocated to each performance obligation? Explain your answer.c. Prepare the journal entry to recognize revenue for the sale of a new membership. Clearly identify revenueor deferred revenue associated with each performance obligation.
Assume F&S offers a deal whereby enrolling in a new membership for $700 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 $720, 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.
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 50” coupon book with 50 prepaid visits over the next year. F&S…
Chapter 3 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Ch. 3 - Prob. 1QCh. 3 - When accounting was developed in the 14th and 15th...Ch. 3 - Define accrual basis accounting and contrast it...Ch. 3 - Prob. 4QCh. 3 - What two questions are answered by the core...Ch. 3 - Prob. 6QCh. 3 - What is a performance obligation?Ch. 3 - How do you report revenue from a contract that...Ch. 3 - Explain the expense recognition principle...Ch. 3 - Explain why stockholders equity is increased by...
Ch. 3 - Explain why revenues are recorded as credits and...Ch. 3 - Complete the following table by entering either...Ch. 3 - Complete the following table by entering either...Ch. 3 - Prob. 14QCh. 3 - Prob. 15QCh. 3 - What is the difference between Accounts Receivable...Ch. 3 - What is the difference between Accounts Payable...Ch. 3 - For each of the following situations, indicate...Ch. 3 - Prob. 19QCh. 3 - Which of the following items is not a specific...Ch. 3 - Which of the following accounts normally has a...Ch. 3 - Prob. 3MCCh. 3 - Which of the following would the core revenue...Ch. 3 - If a company incorrectly records a payment as an...Ch. 3 - Prob. 6MCCh. 3 - Prob. 7MCCh. 3 - Which account is least likely to be debited when...Ch. 3 - Webby Corporation reported the following amounts...Ch. 3 - Which of the following is the entry to be recorded...Ch. 3 - Identifying Performance Obligations Lakeside...Ch. 3 - Prob. 2MECh. 3 - Identifying Accrual Basis Revenues The following...Ch. 3 - Identifying Accrual Basis Expenses The following...Ch. 3 - Recording Accrual Basis Revenues For each of the...Ch. 3 - Recording Accrual Basis Expenses For each of the...Ch. 3 - Prob. 7MECh. 3 - Prob. 8MECh. 3 - Prob. 9MECh. 3 - Prob. 10MECh. 3 - Identifying Accrual Basis Expenses The following...Ch. 3 - Prob. 12MECh. 3 - Recording Accrual Basis Expenses For each of the...Ch. 3 - Prob. 14MECh. 3 - Preparing Accrual Basis Journal Entries for...Ch. 3 - Preparing Accrual Basis Journal Entries for...Ch. 3 - Preparing Accrual Basis Journal Entries and...Ch. 3 - Determining the Accounting Equation Effects of...Ch. 3 - Prob. 19MECh. 3 - Preparing an Income Statement and Calculating Net...Ch. 3 - Preparing Financial Statements from a Trial...Ch. 3 - Preparing an Income Statement and Calculating Net...Ch. 3 - Calculating and Interpreting Net Profit Margin...Ch. 3 - Calculating and Interpreting Net Profit Margin...Ch. 3 - Matching Definitions with Terms Match each...Ch. 3 - Matching Definitions with Terms Match each...Ch. 3 - Identifying Performance Obligations and Timing...Ch. 3 - Identifying Accrual Basis Revenues According to...Ch. 3 - Identifying Accrual Basis Revenues According to...Ch. 3 - Identifying Accrual Basis Expenses Under accrual...Ch. 3 - Identifying Accrual Basis Expenses Under accrual...Ch. 3 - Determining Accounting Equation Effects and Net...Ch. 3 - Determining Accounting Equation Effects and Net...Ch. 3 - Recording Journal Entries and Determining Net...Ch. 3 - Prob. 11ECh. 3 - Recording Journal Entries and Determining Net...Ch. 3 - Recording and Posting Accrual Basis Journal...Ch. 3 - Analyzing Transactions from the Perspectives of...Ch. 3 - Prob. 15ECh. 3 - Determining Accounting Equation Effects of Several...Ch. 3 - Preparing Journal Entries For each of the...Ch. 3 - Prob. 18ECh. 3 - Creating an Unadjusted Trial Balance Based on the...Ch. 3 - Inferring Transactions, Creating Financial...Ch. 3 - Determining the Effects of Various Transactions EZ...Ch. 3 - COACHED PROBLEMS Recording Nonquantitative Journal...Ch. 3 - Prob. 2CPCh. 3 - Prob. 3CPCh. 3 - Prob. 4CPCh. 3 - Prob. 1PACh. 3 - Recording Journal Entries Diana Mark is the...Ch. 3 - Analyzing the Effects of Transactions Using...Ch. 3 - Prob. 4PACh. 3 - Prob. 1PBCh. 3 - Prob. 2PBCh. 3 - Analyzing the Effects of Transactions Using...Ch. 3 - Analyzing, Journalizing, and Interpreting Business...Ch. 3 - Prob. 1COPCh. 3 - Finding Financial Information Refer to the...Ch. 3 - Comparing Financial Information Refer to the...Ch. 3 - Prob. 4SDCCh. 3 - Ethical Decision Making: A Mini-Case Mike Lynch is...Ch. 3 - Accounting for Business Operations Starting in...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Nate Beggs signs a 1-year contract with BlueBox Video. The terms of the contract are that Nate is required to pay a nonrefundable initiation fee of $100. No annual membership fee is charged in the first year. After the first year, membership can be renewed by paying an annual membership fee of $5 per month. BlueBox determines that its customers, on average, renew their annual membership three times after the first year before terminating their membership. What amount of revenue should BlueBox recognize in its first year?arrow_forwardQuestion Ethics and Governance - The impact of a bonus incentive scheme on the financial statements Lucia works as an accountant for a motor vehicle engine parts manufacturer called Vroom Ltd, owned by an international car firm. Her manager, Freda Chuse, is paid a bonus depending on the profitability of the company. If Vroom Ltd makes $1 million profit, Freda receives a bonus of $20 000 that increases progressively to $30 000 for a $3 million profit. If the profit of Vroom Ltd exceeds $3 million, Freda receives the maximum bonus of $30 000. Vroom Ltd currently receives a grant from the government of $100 000 per year to employ and train apprentice mechanics. At the end of May, it appears that Vroom Ltd will make a profit of approximately $3.5 million for the year ending 30 June 2016. Freda approached Lucia and said that if the company made too much profit then the government may stop paying Vroom Ltd the grant for training apprentice mechanics, and it would lose the $100 000…arrow_forwardKigali Club offers athletic court facilities to the public through four locations in the metropolitan area, each with 1,800 to 2,500 members. Revenue is generated from annual membership fees and hourly court fees. Kigali Club is considering changing its membership and fee structure From 1st February in an attempt to change its cash receipts. Under the new plan, only annual membership fees will be paid and members can use the courts as often as they want. The two types of membership will be: Individual $250 Family $300 The fees will be collected in advance at the time of the membership application. All new memberships will be sold under the new plan. Current memberships will be honoured until they expire. A special promotion campaign will be instituted to attract new members and to encourage current members to the new membership plan immediately. The annual fees for individuals and family memberships will be reduced to $200 and $300 respectively during the two months of promotion…arrow_forward
- Pita Pal sells fast-food franchises. Pita Pal receives $82,000 from a new franchisee for providing initial training, equipment, and furnishings that together have a stand-alone selling price of $82,000. Pita Pal also receives $38,100 per year for use of the Pita Pal name and for ongoing consulting services (starting on the date the franchise is purchased). Rachel became a Pita Pal franchisee on March 1, 2021, and on May 1, 2021 Rachel had completed training and was open for business. How much revenue in 2021 will Pita Pal recognize for its arrangement with Rachel?arrow_forwardNate Beggs signs a 1-year contract with Bramble Video. The terms of the contract are that Nate is required to pay a nonrefundable initiation fee of $108. No annual membership fee is charged in the first year. After the first year, membership can be renewed by paying an annual membership fee of $4 per month. Bramble determines that its customers, on average, renew their annual membership three times after the first year before terminating their membership. What amount of revenue should Bramble recognize in its first year? Revenue in first yeararrow_forward1. Debbie acquired a franchise to operate a donut shop from Dollar Donuts, Inc., for $100,000. She incurred anadditional $4,000 in legal costs to negotiate the terms with the franchiser. In five years, the franchise contract will berenegotiated. The current contract also states that there will be a $3, 000 annual fee plus a two percent charge basedon the store's annual revenue, which is expected to average 90,000 per year. What is the franchise cost that should becapitalized? a. $88,000 b. $92, 000 c. $100,000 d. $104,000arrow_forward
- 1. ABC Island, Inc. charges an initial franchise fee of ₱75,000 for the right to operate as a franchisee of ABC Island. Of this amount, ₱25,000 is collected immediately. The remainder is collected in four equal annual installments of ₱12,500 each. These installments have a present value of ₱41,402. As part of the total franchise fee, Frozen Delight also provides training (with a fair value of ₱2,000) to help franchisees get the store ready to open. The franchise agreement is signed on April 1, 2020, training is completed, and the store opens on July 1, 2020. The amount of total revenue from training and franchise on July 1, 2020 is? 64,402 66,402 75,000 0arrow_forwardJohn signs a 1-year contract with Fitness The First Gym. The terms of the contract are that John is required to pay a non-refundable initiation fee of P12,000 and an annual membership fee of P1,000 per month. Fitness The First Gym determines that its customers, on average, renew their annual membership two times before terminating their membership. How much is the annual revenue?arrow_forwardThe Rink offers an annual $200 memberships that entitle members to unlimited use of ice-skating facilities and locker rooms. Each new membership also entitles the member to receive ten "35% off a $5 meal" coupons that are redeemable at the Rink’s snack bar. The Rink estimates that approximately 80% of the coupons will be redeemed, and that, if the coupons weren’t redeemed, $5 meals still would be discounted by 5% because of ongoing promotions. Prepare the journal entry to recognize the sale of a new membership.Clearly identify revenue or deferred associated with each field obligation.arrow_forward
- Sharon Els sells security systems for Guardsman Security Co. Els has a monthly sales quota of $40,000. If Els exceeds this quota, she is awarded a bonus. In measuring the quota, a sale is credited to the salesperson when a customer signs a contract for installation of a security system. Through the 25th of the current month, Els has sold $30,000 in security systems. Vortex Co., a business rumored to be on the verge of bankruptcy, contacted Els on the 26th of the month about having a security system installed. Els estimates that the current contract would yield about $14,000 worth of business for Guardsman Security Co. In addition, this contract would be large enough to put Els "over the top" for a bonus in the current month. However, Els in concerned that Vortex Co. will not be able to make the contract payment after the security system is installed. In fact, Els has heard rumors that a competing security services company refused to install a system for Vortex Co. because of these…arrow_forward11. PEANUTS Company, a grocery retailer operates a customer loyalty program. It grants program members loyalty points when they spend a specified amount of groceries. Program members can redeem the points for further groceries. The points have no expiry date. During the year 2020, the entity grants 100,000 points, but management expects that only 80,000 points will be redeemed. The management of PEANUTS estimates the fair value of each loyalty point to be ₱1 and defers revenue in the amount of ₱100,000. During the year 2020, the company had redeemed 40,000 points. But during the year 2021, the management revises their expectation, it now expects to redeem 90,000 points. In 2021, the company redeemed 45,000 points. What amount of revenue from the loyalty program should PEANUTS recognize for the year ended December 31, 2021? a. ₱ 20,000 b. ₱ 25,000 c. ₱ 50,000 d. ₱ 45,000arrow_forwardRocky Guide Service provides guided 1 to 5 day hiking tours throughout the Rocky Mountains. Wilderness Tours hires Rocky to lead various tours that Wilderness sells. Rocky receives $2,500 per tour day, and shortly after the end of each month, Rocky learns whether it will receive a $250 bonus per tour day it guided during the previous month if its service during that month received an average evaluation of "excellent" by Wilderness customers. The $2,500 per day and any bonus due are paid in one lump payment shortly after the end of each month. On July 1, based on prior experience, Rocky estimated there is a 40% chance it will earn the bonus for July tours. It guided a total of 10 days from July 1 to July 15. On July 16, based on Rocky’s view that it had provided excellent service during the first part of the month, Rocky revised its estimate to an 90% chance it would earn the bonus for July tours. Rocky also guided customers for 15 days from July 16 to July 31. On August 5, Rocky…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
HR Basics: Compensation; Author: HR Basics: Compensation;https://www.youtube.com/watch?v=wZoRId6ADuo;License: Standard Youtube License