Ski West, Incorporated, operates a downhill ski area near Lake Tahoe, California. An all-day adult lift ticket can be purchased for $80. Adult customers also can purchase a season pass that entitles the pass holder to ski any day during the season, which typically runs from December 1 through April 30. Ski West expects its season pass holders to use their passes equally throughout the season. The company’s fiscal year ends on December 31.

On November 6, 2024, Jake Lawson purchased a season pass for $430.

Required:

When should Ski West recognize revenue from the sale of its season passes?
Prepare the appropriate journal entries that Ski West would record on November 6 and December 31.
What will be included in the Ski West 2024 income statement and balance sheet related to the sale of the season pass to Jake Lawson?

On March 1, 2024, Gold Examiner receives $154,000 from a local bank and promises to deliver 96 units of certified 1-ounce gold bars on a future date. The contract states that ownership passes to the bank when Gold Examiner delivers the products to Brink’s, a third-party carrier. In addition, Gold Examiner has agreed to provide a replacement shipment at no additional cost if the product is lost in transit. The stand-alone price of a gold bar is $1,560 per unit, and Gold Examiner estimates the stand-alone price of the replacement insurance service to be $65 per unit. Brink’s picked up the gold bars from Gold Examiner on March 30, and delivery to the bank occurred on April 1.

Required:

How many performance obligations are in this contract?
to 4.Prepare the journal entry Gold Examiner would record on March 1, March 30, and April Thomas Consultants provided Bran Construction with assistance in implementing various cost-savings initiatives. Thomas’s contract specifies that it will receive a flat fee of $70,000 and an additional $40,000 if Bran reaches a prespecified target amount of cost savings. Thomas estimates that there is a 30% chance that Bran will achieve the cost-savings target.

Required:

Assuming Thomas uses the expected value as its estimate of variable consideration, calculate the transaction price.
Assuming Thomas uses the most likely value as its estimate of variable consideration, calculate the transaction price.
Assume Thomas uses the expected value as its estimate of variable consideration, but is very uncertain of that estimate due to a lack of experience with similar consulting arrangements. Calculate the transaction price.

Rocky Guide Service provides guided 1 to 5 day hiking tours throughout the Rocky Mountains. Wilderness Tours hires Rocky to lead various tours that Wilderness sells. Rocky receives $2,500 per tour day, and shortly after the end of each month, Rocky learns whether it will receive a $250 bonus per tour day it guided during the previous month if its service during that month received an average evaluation of “excellent” by Wilderness customers. The $2,500 per day and any bonus due are paid in one lump payment shortly after the end of each month.

On July 1, based on prior experience, Rocky estimated there is a 40% chance it will earn the bonus for July tours. It guided a total of 10 days from July 1 to July 15.
On July 16, based on Rocky’s view that it had provided excellent service during the first part of the month, Rocky revised its estimate to an 90% chance it would earn the bonus for all July tours. Rocky also guided customers for 15 days from July 16 to July 31.
On August 5, Rocky learned it did not receive an average evaluation of “excellent” for its July tours, so it would not receive any bonus for July, and received all payment due for the July tours.

Rocky bases estimates of variable consideration on the most likely amount it expects to receive.

Required:

Prepare Rocky’s July 15 journal entry to record revenue for tours given from July 1–July 15.
Prepare Rocky’s July 31 journal entry to record revenue for tours given from July 16–July 31.
Prepare Rocky’s August 5 journal entry to record any necessary adjustments to revenue and receipt of payment from Wilderness.

Note: If no entry is required on a specific date, select “No journal entry required” in the first account field.

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

Required:

Assume F&S offers a deal whereby enrolling in a new membership for $1,200 provides a year of unlimited access to facilities and also entitles the member to receive a voucher redeemable for 30% 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 $1,235, and a one-year enrollment in yoga classes sells for an additional $650. F&S estimates that approximately 50% of the vouchers will be redeemed. F&S offers a 10% discount on all one-year enrollments in classes as part of its normal promotion strategy.

& 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.
Prepare the journal entry to recognize revenue for the sale of a new membership.

Assume F&S offers a “Fit 50” coupon book with 50 prepaid visits over the 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 $650 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.

& 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.
Prepare the journal entry to recognize revenue for the sale of a new Fit 50 book.

Supply Club, Incorporated, sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2024, it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% (equal to 20 cents). Customers earn one loyalty point for each dollar of goods purchased, but do not earn additional loyalty points for purchases that are made by redeeming loyalty points. Based on past experience, Supply Club estimates a 60% probability that any point issued will be redeemed for the discount. During July 2024, the company redeemed 13,200 points and sold additional product of $165,000, so it recorded of revenue of $178,200. The aggregate stand-alone selling price of the purchased products is $178,200. Seventy percent of sales were cash sales, and the remainder were credit sales.

Required:

& 2.Prepare Supply Club’s journal entry to record July and August sales. During August, customers redeem loyalty points on $79,200 of merchandise. Sixty-five percent of those sales were for cash, and the remainder were credit sales.

Note: Do not round intermediate calculations. If no entry is required for a transaction/event, select “No journal entry required” in the first account field.

Since 1970, Super Rise, Incorporated, has provided maintenance services for elevators. On January 1, 2024, Super Rise obtains a contract to maintain an elevator in a 90-story building in New York City for 10 months and receives a fixed payment of $116,000. The contract specifies that Super Rise will receive an additional $58,000 at the end of the 10 months if there is no unexpected delay, stoppage, or accident during the year. Super Rise estimates variable consideration to be the most likely amount it will receive.

Required:

Assume that Super Rise anticipates it will earn the performance bonus, but is highly uncertain about its estimate given unfamiliarity with the building and uncertainty about its access to the elevators and related equipment. Prepare the journal entry Super Rise would record on January 1.
Assume the same facts as requirement 1. In addition, assume that, on May 31, Super Rise determines that it has sufficient experience with the company to make an accurate estimate of the likelihood that it will earn the performance bonus, and concludes that it is likely to earn the performance bonus. Prepare the journal entry Super Rise would record on May 31 to recognize May revenue and any necessary revision in its estimated bonus receivable.