Journal Entries for an Up Front, Nonrefundable Fee
Body Tone Company sells lifetime health club memberships. For one up front, nonrefundable fee, a customer becomes a lifetime member of Body Tone’s network of health clubs. The fee is $2,000. The fee includes full access to all of the club facilities plus an initial comprehensive physical, mental, and spiritual wellness evaluation. The wellness evaluation is frequently sold separately for $400. Occasionally, Body Tone sells lifetime memberships without the wellness evaluation; the price is $1,750. Body Tone can reliably estimate that the average customer will use the health club facilities for 5 years. On January 1, 2008, Body Tone received lifetime membership payments from 300 new customers. The direct cost of providing a wellness evaluation is $70, and the direct cost of providing health club access for one person for one year is $250. All of the wellness evaluations were completed during 2008.Make all of the journal entries necessary in 2008 in connection with these 300 new memberships. Assume that all costs were incurred in cash.