Prompt: The purpose of this assignment is for students to think critically about the concept of multiple performance obligations.
Caleb’s Body Shop is a gym that sells annual memberships for $1,200. Each membership sold includes 12 coupons for $1 off at the gym’s juice bar — the coupons are similar to gift cards. (When a gym membership is sold, therefore, the gym is obligated to provide two different services.) However, past experience shows that only 50% of the coupons are actually redeemed. State which accounts should be debited and credited, for how much, and explain why.
Requirements – Instructions:
Write one paragraph discussing the accounting concepts behind reporting unearned income.
Write one paragraph discussing how to report contingent liabilities.
Write one paragraph defining and explaining multiple performance obligations.
Give the journal entry to record the sale of one membership.
Write one paragraph explaining the entry in (4).
Parts 1, 2, 3, and 5 each require a labeled paragraph of at least 100 words. Part 4 does not require text, but you must show the accounting entry in the standard general journal format. The assignment must follow APA citation. (Total of 400 words)
