e clothing retailer chain, Koll's, offers a sales incentive program where customers receive direct credit toward future the dollar amount of purchases today. For every $50 spent today, the customer will earn a $6 credit to be used at k redit expires 5 days after it becomes active. Not all customers will redeem the credit in the 5-day window of time. B s, Koll's estimates that 35% of the credits will be redeemed. termine how many performance obligations are included in a sales transaction during the sales incentive program. performance obligations
e clothing retailer chain, Koll's, offers a sales incentive program where customers receive direct credit toward future the dollar amount of purchases today. For every $50 spent today, the customer will earn a $6 credit to be used at k redit expires 5 days after it becomes active. Not all customers will redeem the credit in the 5-day window of time. B s, Koll's estimates that 35% of the credits will be redeemed. termine how many performance obligations are included in a sales transaction during the sales incentive program. performance obligations
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
please answer part C and part D but not in image format

Transcribed Image Text:Identifying and Recording Customer Option for Additional Merchandise
A large clothing retailer chain, Koll's, offers a sales incentive program where customers receive direct credit toward future purchases based
upon the dollar amount of purchases today. For every $50 spent today, the customer will earn a $6 credit to be used at Koll's in two weeks.
The credit expires 5 days after it becomes active. Not all customers will redeem the credit in the 5-day window of time. Based upon historical
trends, Koll's estimates that 35% of the credits will be redeemed.
a. Determine how many performance obligations are included in a sales transaction during the sales incentive program.
Two performance obligations
b. Assuming that Koll's sold $500,000 of merchandise (cost of $200,000) during the first day of the sales incentive period and 10,000, $6
credits were given, record the journal entry(ies) to record sales revenue. Assume all sales were cash sales.
Note: Carry all decimals in calculations; round the final answer to the nearest dollar.
Performance
Obligations
Merchandise
Customer option-merchandise credit
Cash
Account Name
$
$
Sales Revenue
Deferred Revenue-Merchandise Credit
To record the sale of merchandise
Cost of Goods Sold
Inventory
To record the cost of sale of merchandise
Transaction
Price
as Stated
<< <
<<
500,000 S
0 ✓
500000 $
Debit
500,000
0
0
200,000
0
Standalone
Selling
Price
Credit
500,000 $
21,000 ✓
0
479,846
20,154
0
200,000
521000 $
Total Allocated
Transaction Price
(rounded)
479,846
20,154 ✓
500000

Transcribed Image Text:c. Record a summary entry to recognize revenue (if any) during the 5-day merchandise credit redemption period, assuming that 35% of the
credits are redeemed.
Contract Asset
Account Name
X
Sales Revenue
To receognize revenue.
Contract Asset
Account Name
x
Debit
Sales Revenue
To receognize revenue.
20,154
0
d. Record a summary entry to recognize revenue (if any) at the conclusion of the 5-day merchandise credit redemption period, assuming
that no credits are redeemed.
Debit
Credit
20,154
0
0x
20,154 x
Credit
0x
20,154 x
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