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Get Fit Now gains a client who prepays $540 for a package of six physical training sessions. Get Fit Now collects the $540 in advance and will provide the training later. After four training sessions, what should Get Fit Now report on its income statement?

a. Service revenue of $360

b. Service revenue of $540

c. Unearned service revenue of $360

d. Cash of $180

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Answers (1)
  1. Today, 14:37
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    a. Service revenue of $360

    Explanation:

    Unearned service revenue for 6 sessions = $540

    Unearned service revenue for 1 sessions = $540 / 6

    Unearned service revenue for 1 sessions = $90

    As four sessions are completed the revenue for these session will be recognized as follows:

    Service service revenue for 4 sessions = $90 x 4

    Service service revenue for 4 sessions = $360

    Unearned revenue balance = $540 - $360 = $180

    Service revenue of $360 will be reported on the income statement as Get fit only provided the 4 sessions out of 6, whereas unearned revenue and cash account will be reported on balance sheet with a value of $180 and $540 respectively.
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