Assume F&S offers a ~'Fit 50~' coupon book with 50 prepaid visits over next year. F&S has learned...


Assume F&S offers a "Fit 50" coupon book with 50 prepaid visits over next year. F&S has learned that Fit 50 purchasers make an average of 40 visits before the coupon book expires. A customer purchases a Fit 50 book by paying $500 in advance, and for any additional visits over 50 during the year after the book is purchased, the customer can pay a $15 visitation fee per visit. F&S typically charges $15 to nonmembers who use the facilities for a single day.

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.

Recognizing Revenue from Service Contracts:

When a client buys a service contract or subscription from a company, the revenue from the purchase must be recognized as and when the services are delivered, and not when the contract sale takes place.

Answer and Explanation: 1

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The sale of the Fit 50 coupon book is one performance obligation (to provide an estimated 40 gym visits).

The company will record the revenue as...

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What is Revenue Recognition? - Principles, Process & Examples


Chapter 7 / Lesson 2

Revenue recognition states that revenue is recorded when it is realized, or realizable and earned, as opposed to received. Learn about the principles and process of revenue recognition with examples of recognition criteria before exploring some exceptions to the rule.

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