Hercules Workout World gains a client who prepays $ 570 for a package of six physical training sessions. Hercules Workout World collects the $ 570 in advance and will provide the training later. After four training​ sessions, what should Hercules Workout World report on its income statement assuming it uses the accrual basis accounting​ method?

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Question:

Hercules Workout World gains a client who prepays $ 570 for a package of six physical training sessions. Hercules Workout World collects the $ 570 in advance and will provide the training later. After four training​ sessions, what should Hercules Workout World report on its income statement assuming it uses the accrual basis accounting​ method?

Answers

Answer:$340Explanation:When an amount is received in advance for service yet to be rendered, an asset and a liability is created in the books of the company that received the payment.Given that Hercules Workout World gains a client who prepays $ 570 for a package of six physical training sessions. It means that the cost of a package= $570/6= $85After four training​ sessions, Hercules Workout World would have earned= $85 × 4 = $340This amount would be recognized as revenue earned in the income statement assuming it uses the accrual basis accounting​ method.

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