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you sigh up for a health club and pay a $100 initiation fee for a 2...

you sigh up for a health club and pay a $100 initiation fee for a 2 year membership.

(a) what happens to the company's balance sheet immediately after?

(b) when should they recognize the $100 revenue?

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Answer #1

A- Company Assets shall increase by 100 as cash balance will increase and on the other side Liabilities side, liabilities shall increase by 100 of unearned revenue.

B. company chooses not to recognize any revenue related to the 100 initiation fee until the end of the period, when the 2 years membership expires.

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