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Byron and Co. owns several gyms. Members pay an upfront fee for access to the gyms....

Byron and Co. owns several gyms. Members pay an upfront fee for access to the gyms. The firm has been recognizing the revenue of these fees when memberships are initiated. Assume there are memberships initiated every year and not all memberships are initiated on the first day of the fiscal year. If the firm had recognized fees over the life of the membership
a. Liabilities would be higher, and shareholders’ equity would be lower, but income before taxes for a given period could be higher or lower.
b. Liabilities and shareholders’ equity would be higher, but income before taxes for a given period could be higher or lower.
c. Liabilities, shareholders’ equity and income before taxes would be higher.
d. There would be no effect on liabilities or shareholders’ equity, but net income would be higher.

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Answer #1
Liabilities would be higher, and shareholders’ equity would be lower, but income before taxes for a given period could be higher or lower.
Option A is correct
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