Revenue recognition for a fitness center should be recognized throughout the year. If membership dues are collected quarterly, the revenue recognition should be divided into four equal parts. Upon signing up the member is immediately allowed to use the facility that is partial service provided by the fitness center. The first payment seems to be due at the end of the first quarter. There is a sign-up fee, however that is for the year so it should be spread throughout the year. I would add a portion of that fee to each quarter. At the end of each quarter, the member has been provided the access to the facility and has paid their dues for that quarter, that is when revenue recognition should occur.

If revenue is recognized too early a misrepresentation of revenue could occur. For example, if the fitness center calculates the expected revenue from that membership for the year and recognizes that revenue at the time of sign up, it would be misleading if the member decides to cancel before the year is up. If they did that with all of their memberships, they could overspend due to anticipating a higher revenue then they will actually have at the end of the year.

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What would be a constructive response to the above?

Answer rating: 100% (QA)

I agree with the analysis of revenue recognition for a fitness center It is important to recognize revenue throughout the year to avoid misrepresenting revenue especially in the event of early cancell... View the full answer