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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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please answer part C and part D but not in image format

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: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
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
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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