How much of the sales should be allocated to the award points? How much should be recognized as revenue for 2020? How much should be recognized as revenue for 2021?
Use the information for the next three (3) questions. Seva Company operates a customer loyalty program. The entity grants program members loyalty points when they spend a specified amount on purchases. Program members can redeem the points for further purchases. The points have no expiry date.
During 2020, the customer earned 60,000 points. Management expects that 100% of these points will be redeemed. The stand-alone selling price of each loyalty point is estimated at P20. The sales during 2020 amounted to P6,800,000 based on stand-alone selling price.
On December 31, 2020, 28,800 points have been redeemed in exchange for purchases.
In 2021, the management revised expectations and now expects 90% of the points to be redeemed. 9,000 points were redeemed during the year.
How much of the sales should be allocated to the award points?
How much should be recognized as revenue for 2020?
How much should be recognized as revenue for 2021?
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