FirstFitness Ltd is a company that operates a number of fitness clubs ('gyms'). FirstFitness is currently offering
Question:
FirstFitness Ltd is a company that operates a number of fitness clubs ('gyms'). FirstFitness is currently offering potential customers a new gym membership at discounted price. The terms of the new gym membership are:
• For an up-front cash payment of $1,000, new members will have full access to all the training facilities at a nominated gym for a 12-month period. The $1,000 fee is nonrefundable. A monthly gym membership alone is normally priced at $100.
• In addition, for the first three months of their membership, new members will receive 'free' access once a week to a half-hour individual session with a personal trainer. Three months of such personal training sessions would normally cost members $420.
• And wait, there's more! As an added incentive, all new members who attend all of their sessions with the personal trainer in the first two months will receive a 'free' set of training weights at the end of that two-month period. FirstFitness's prior experience with such offers is that all members receive the 'bonus' items at the end of the qualifying period. The training weights normally have a retail price of $80.
REQUIRED
1) Identify the transaction price. Calculate the amount that would be allocated to each performance obligation. And indicate the timing of any revenue that would be recognised by FirstFitness Ltd. Show all your workings.
2) Daenerys took this new gym membership offer and joined the FirstFitness on 1 May 2023. Prepare the journal entries required by FirstFitness for the year ending 30 June 2023 (i.e., from 1 May 2023 to 30 June 2023). Narrations are NOT required.
Intermediate Accounting Volume 1
ISBN: 978-1119496496
12th Canadian edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy