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The Spectrum Fitness Club charges a nonrefundable annual membership fee of $1,200 for its services. For this fee, each member receives a fitness evaluation (value $200), a monthly magazine (annual...

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The Spectrum Fitness Club charges a nonrefundable annual membership fee of $1,200 for its services. For this fee, each member receives a fitness evaluation (value $200), a monthly magazine (annual value $25), and two hours’ use of the equipment each week (annual value $1,100). Each of the three elements of the annual membership can be purchased separately. The initial direct costs to obtain the membership are $180. The direct cost of the fitness evaluation is $100, and the monthly direct costs to provide the other services are estimated to be $25 per person. Give the journal entries to record the transactions in 2011 relative to a membership sold on May 1, 2011.

Answered Same Day Dec 29, 2021

Solution

David answered on Dec 29 2021
111 Votes
Record Initial Fitness Evaluation
Because the initial fitness evaluation has taken place, we can now recognize the associated
defe
ed costs and unearned revenue.
May 1 Initial Evaluation Costs 127
Defe
ed Initial Evaluation Cost 27
Cash 100
To record costs of initial fitness evaluation
May 1 Unearned Evaluation Fees 181
Fitness Evaluation Fees 181
To recognize revenue from fitness evaluation
Record Monthly Direct Costs
At the end of the year the total monthly direct...
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