Reference no: EM131598956

Problem -

Platinum Fitness offers group classes and regular gym access. The group classes are scheduled at 10AM, 1PM, 4PM, 7PM and 10PM each day, seven days a week, 52 weeks a year, except for ten (10) pre announced holidays when the spa is closed. The regular gym is open from 7AM until 11PM each day, and a member can arrive without an appointment, and may use a workout designed by the spa, or use his/her own program. Memberships are sold as follows:

Term                       Regular Gym              Group Classes

1 Year                         $ 180                          $ 120

2 Year                         $ 300                          $ 150

Basically, a member buys a membership to each amenity of the club, regular access and group classes.

Franco purchases a two year membership to both the gym and the group classes on March 1, 2017. Platinum Fitness records the income for financial statement purposes on a pro-rata basis.

(a) Platinum Fitness operates as a calendar year, accrual basis taxpayer. Franco purchases a 2 year membership on April 1, 2017 by paying cash of $450. How should Platinum Fitness account for this payment?

(b) Would your answers in (a) change if Platinum Fitness operated as a cash method taxpayer?