The Rink membership is one separate performance obligation, as it could be sold separately. Since the discount coupon provides a material right to the customer that the customer would not receive otherwise (a 20% discount rather than a 5% discount), the discount voucher also is a separate performance obligation.
2. To allocate the contract price to the performance obligation, we should first consider that the Rink would offer a 5% discount on $5 meals sold to all customers. So, a 20% discount provides a customer with an incremental value of 15% (20% - 5%). Thus, the estimated stand-alone selling price of the meal coupons is $6 (= 10 coupons x $5 base price of meal x 15% savings x 80% redeemed). Since the stand-alone selling price of the annual membership fee is $200, the Rink would allocate $5.83 {= $200 × [6 ÷ (6 + 200)]} of the $200 transaction price to the discount coupon.
3. Since the discount coupon would be a separate performance obligation, the Rink would recognize unearned revenue for the sale of the annual membership fee and unearned revenue for the sale of the discount coupon.

Question

Quizplus · Accepted Answer

The Answer of The Rink membership is one separate performance obligation, as it could be sold separately. Since the discount coupon provides a material right to the customer that the customer would not receive otherwise (a 20% discount rather than a 5% discount), the discount voucher also is a separate performance obligation.
2. To allocate the contract price to the performance obligation, we should first consider that the Rink would offer a 5% discount on $5 meals sold to all customers. So, a 20% discount provides a customer with an incremental value of 15% (20% - 5%). Thus, the estimated stand-alone selling price of the meal coupons is $6 (= 10 coupons x $5 base price of meal x 15% savings x 80% redeemed). Since the stand-alone selling price of the annual membership fee is $200, the Rink would allocate $5.83 {= $200 × [6 ÷ (6 + 200)]} of the $200 transaction price to the discount coupon.
3. Since the discount coupon would be a separate performance obligation, the Rink would recognize unearned revenue for the sale of the annual membership fee and unearned revenue for the sale of the discount coupon.

The Rink Membership Is One Separate Performance Obligation, as It