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 $5 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. Answerb. Assuming that Koll’s sold $700,000 of merchandise (cost of $280,000) during the first day of the sales incentive period, record the journal entry(ies) to record sales revenue. Assume all sales were cash sales.Note: Round each allocated transaction price to the nearest whole dollar. Performance Obligations TransactionPriceas Stated StandaloneSellingPrice AllocatedTransactionPrice(rounded) Merchandise Answer Answer Answer Customer option-merchandise credit Answer Answer Answer Answer Answer Answer Account Name Dr. Cr. Answer Answer Answer Answer Answer Answer Sales Revenue Answer Answer To record the sale of merchandise. Answer Answer Answer Answer Answer Answer To record the sale of merchandise. 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. Account Name Dr. Cr. Answer Answer Answer Answer Answer Answer 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. Account Name Dr. Cr. Answer Answer Answer Answer Answer Answer

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 $5 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. Answerb. Assuming that Koll’s sold $700,000 of merchandise (cost of $280,000) during the first day of the sales incentive period, record the journal entry(ies) to record sales revenue. Assume all sales were cash sales.Note: Round each allocated transaction price to the nearest whole dollar. Performance Obligations TransactionPriceas Stated StandaloneSellingPrice AllocatedTransactionPrice(rounded) Merchandise Answer Answer Answer Customer option-merchandise credit Answer Answer Answer Answer Answer Answer Account Name Dr. Cr. Answer Answer Answer Answer Answer Answer Sales Revenue Answer Answer To record the sale of merchandise. Answer Answer Answer Answer Answer Answer To record the sale of merchandise. 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. Account Name Dr. Cr. Answer Answer Answer Answer Answer Answer 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. Account Name Dr. Cr. Answer Answer Answer Answer Answer Answer

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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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 $5 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.
Answer

b. Assuming that Koll’s sold $700,000 of merchandise (cost of $280,000) during the first day of the sales incentive period, record the journal entry(ies) to record sales revenue. Assume all sales were cash sales.
Note: Round each allocated transaction price to the nearest whole dollar.

Performance Obligations	Transaction Price as Stated	Standalone Selling Price	Allocated Transaction Price (rounded)
Merchandise	Answer	Answer	Answer
Customer option-merchandise credit	Answer	Answer	Answer
	Answer	Answer	Answer

Account Name	Dr.	Cr.
Answer

Answer	Answer
Answer

Answer	Answer
Sales Revenue	Answer	Answer
To record the sale of merchandise.
Answer

Answer	Answer
Answer

Answer	Answer
To record the sale of merchandise.

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.

Account Name	Dr.	Cr.
Answer

Answer	Answer
Answer

Answer

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.

Account Name	Dr.	Cr.
Answer

Answer	Answer
Answer

Answer

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