All Mart Inc. (AMI) rewards its frequent shoppers with gift cards. The premium program awards members one point for every dollar spent. AMI provides members with a $20 gift card for every 1,000 points redeemed, which can then be used to purchase additional merchandise at AMI. (Normally additional merchandise is purchased right after obtaining the gift cards). Additional information is as follows: -Points expire six years after they have been earned. 80% of the points are expected to be redeemed, points represent a separate revenue stream. In 2020 AMI cash sales totalled $15,000,000, no sales are on account. -AMI's markup on cost is a constant 50% (ie: items costing $1 are sold for $1.50) -In 2021 AMI customers redeemed 3,000,000 of the 2020 points earned; -In 2022, AMI customers redeemed 4,500,000 of the 2020 points earned. Required: 1) Compute the amount of expected gift cards redeemable from the cash sales. 2) Prepare a journal entry to record revenue transactions in 2020; 3) Prepare journal entries to record premium revenue and costs in 2021 and 2022
All Mart Inc. (AMI) rewards its frequent shoppers with gift cards. The premium program awards members one point for every dollar spent. AMI provides members with a $20 gift card for every 1,000 points redeemed, which can then be used to purchase additional merchandise at AMI. (Normally additional merchandise is purchased right after obtaining the gift cards). Additional information is as follows: -Points expire six years after they have been earned. 80% of the points are expected to be redeemed, points represent a separate revenue stream. In 2020 AMI cash sales totalled $15,000,000, no sales are on account. -AMI's markup on cost is a constant 50% (ie: items costing $1 are sold for $1.50) -In 2021 AMI customers redeemed 3,000,000 of the 2020 points earned; -In 2022, AMI customers redeemed 4,500,000 of the 2020 points earned. Required: 1) Compute the amount of expected gift cards redeemable from the cash sales. 2) Prepare a journal entry to record revenue transactions in 2020; 3) Prepare journal entries to record premium revenue and costs in 2021 and 2022
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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subject-Accounting
Transcribed Image Text:All Mart Inc. (AMI) rewards its frequent shoppers with gift cards. The premium program awards
members one point for every dollar spent. AMI provides members with a $20 gift card for every
1,000 points redeemed, which can then be used to purchase additional merchandise at AMI.
(Normally additional merchandise is purchased right after obtaining the gift cards). Additional
information is as follows:
-Points expire six years after they have been earned. 80% of the points are expected to be
redeemed, points represent a separate revenue stream.
In 2020 AMI cash sales totalled $15,000,000, no sales are on account.
-AMI's markup on cost is a constant 50% (ie: items costing $1 are sold for $1.50)
-In 2021 AMI customers redeemed 3,000,000 of the 2020 points earned;
-In 2022, AMI customers redeemed 4,500,000 of the 2020 points earned.
Required:
1) Compute the amount of expected gift cards redeemable from the cash sales.
2) Prepare a journal entry to record revenue transactions in 2020;
3) Prepare journal entries to record premium revenue and costs in 2021 and 2022
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