PLEASE EXPLAIN IN FULL DETAIL. SHOW SOLUTION IF NEEDED

Burn & Fit (B&F) is a health club that offers members various gym services.

Assume B&F offers a deal whereby enrolling in a new membership for P700 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 P720, and a one-year enrollment in yoga classes sells for an additional

P500.

B&F estimates that approximately 40% of the vouchers will be redeemed. B&F offers a 10% discount on all

one-year enrollments in classes as part of its normal promotion strategy.

9. How many performance obligations are included in the new member deal?

a. 0 c. 2

b. 1 d. 3

10. How much of the contract price would be allocated to each performance obligation (stand-alone

selling price of yoga discount voucher and gym membership, respectively)?

a. P 0; P750 c. P750; P 0

b. P30; P720 d. P 28; P672

11. The journal entry to recognize sale of a new membership. Clearly identify revenue or deferred revenue

associated with each performance obligation:

a. Cash 700

Deferred revenue - membership fees 672

Deferred revenue - yoga option 28

b. Cash 700

Deferred revenue - membership fees 700

c. Cash 700

Deferred revenue - yoga option 700

d. Cash 700

Revenue - membership fees 672

Revenue - yoga option 28

TS Trading consigned 100 beds costing P600 each to PP Company. The advertised selling price is P1,000

each bed. The consignment agreement provides that the consignee is to be allowed a commission of 15%

of the selling price. Furthermore, PP Company has to draw a sight draft for 60% of the cost of the beds; the

advance is to be recovered periodically by monthly deductions (in proportion to units sold) from the

remittances which accompany the account sales. All expenses of the consignee are to be deducted

monthly as incurred.

At the end of the first month, the consignee rendered an account sales showing among others the following

charges: Commission, P2,250; Advertising, P1,500; and Delivery Expense, P750.

4. The number of units sold by PP Co. is:

a. 10 c. 20

b. 15 d. 25

5. The amount remitted to TS Co. for the month is

a. P1,500 c. P5,100

b. P4,500 d. P5,500

6. The consignment profit (loss) of TS Co. is:

a. (P1,500.00) c. P3,412.50

b. P 2,137.50 d. None of the above