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AIN3701 Assignment 3 2025 (651535) - Due 8 August 2025

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  • Automation and data analysis (AIN3701)
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  • University Of South Africa

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  • July 31, 2025
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  • ain3701 assignment due 8 august

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  • Automation and data analysis (AIN3701)
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AIN3701
Assignment 3
DUE 8 August 2025

,Question 2 (a): Identification of Performance Obligations under IFRS 15

Under IFRS 15, the GymStarter 24-month contract includes the following distinct
performance obligations:

1. Access to Gym Facilities
o This obligation provides the customer with access to all gym-related
services, including equipment, group classes, and general fitness support
over a 24-month period.
o This service is considered a continuous performance obligation and
revenue will be recognised over time, as the customer benefits
simultaneously from the services provided.
2. Conditional Incentive Items
o The contract includes additional items the customer may receive if specific
conditions are met:
 A branded towel (after attending 8 sessions within the first 8 weeks)
 A branded T-shirt (after 16 sessions)
 A gym bag (after 24 sessions)
o These items are treated as separate performance obligations, as they
provide added value to the customer and are not incidental to the main
service.
o However, the obligation to deliver these items only arises if the customer
meets the relevant attendance criteria, meaning they are conditional
promises.

Question 2 (b): Journal Entry – 1 January 2025

At the start of the contract, the following accounting entry is recorded:

text
CopyEdit
Dr Contract Asset / Trade Receivable R24,000
Cr Contract Liability – Gym Services R23,741

, Cr Contract Liability – Incentives R259

Explanation:

 The full contract value (R24,000) is allocated between the gym services and the
potential incentive items.
 Since the services will be delivered over time and the incentives are conditional,
both amounts are initially recorded as contract liabilities, reflecting deferred
revenue.

Question 2 (c): Journal Entry – 31 January 2025 (No Incentive Milestones
Reached)

1. Receipt of monthly payment:

text
CopyEdit
Dr Bank / Cash R1,000
Cr Contract Asset / Trade Receivable R1,000

2. Revenue recognised for gym services provided in January:

text
CopyEdit
Dr Contract Liability – Gym Services R989.21
Cr Gym Revenue R989.21

Explanation:

 A payment of R1,000 is received for the month of January.
 The portion of gym service provided during this month is calculated as R23,741 ÷
24 months = R989.21 and is now recognised as revenue.
 No incentive-related revenue is recognised because the conditions have not yet
been met.

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