Bezamon Shoes Shop has a customer loyalty program in which it issues points to customers for every cash purchase that can be applied to future purchases. For every dollar spent, a customer receives one point. Each point is worth three cents. There is no expiry date on the points. Bezamon estimates that 30% of the points issued will eventually be redeemed. The program was started in 2020. During 2020, 8oo,000 points were issued. Sales for 2020 were $400,000. In 2021, 1.3 million points were issued. Total sales for 2021 were $500,000. Bezamon has a December 31 year end. Required: 1. What is the stand-alone value of the points issued in 2020? In 2021? 2. Prepare the journal entries to record the sales for 2020 and 2021. 3. When the points are redeemed, how is this accounted for? What is the impact of the point redemptions on profit and cash flow?

Bezamon Shoes Shop has a customer loyalty program in which it issues points to customers for every cash purchase that can be applied to future purchases. For every dollar spent, a customer receives one point. Each point is worth three cents. There is no expiry date on the points. Bezamon estimates that 30% of the points issued will eventually be redeemed. The program was started in 2020. During 2020, 8oo,000 points were issued. Sales for 2020 were $400,000. In 2021, 1.3 million points were issued. Total sales for 2021 were $500,000. Bezamon has a December 31 year end. Required: 1. What is the stand-alone value of the points issued in 2020? In 2021? 2. Prepare the journal entries to record the sales for 2020 and 2021. 3. When the points are redeemed, how is this accounted for? What is the impact of the point redemptions on profit and cash flow?

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter16: Accounting Periods And Methods

Section: Chapter Questions

Problem 33P

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