Supply Club, Inc., sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2021 it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% (equal to 20 cents). Customers do not earn additional loyalty points for purchases on which loyalty points are redeemed. Based on past experience, Supply Club estimates a 80% probability that any point issued will be redeemed for the discount. During July 2021, the company records $136,000 of revenue and awards 150,000 loyalty points. The aggregate stand-alone selling price of the purchased products is $136,000. Seventy-five percent of sales were cash sales, and the remainder were credit sales. Required: 1. & 2. Prepare Supply Club's journal entry to record July and August sales. During August, customers redeem loyalty points on $96,000 of merchandise. Seventy-five percent of those sales were for cash, and the remainder were credit sales. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Supply Club, Inc., sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2021 it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% (equal to 20 cents). Customers do not earn additional loyalty points for purchases on which loyalty points are redeemed. Based on past experience, Supply Club estimates a 80% probability that any point issued will be redeemed for the discount. During July 2021, the company records $136,000 of revenue and awards 150,000 loyalty points. The aggregate stand-alone selling price of the purchased products is $136,000. Seventy-five percent of sales were cash sales, and the remainder were credit sales. Required: 1. & 2. Prepare Supply Club's journal entry to record July and August sales. During August, customers redeem loyalty points on $96,000 of merchandise. Seventy-five percent of those sales were for cash, and the remainder were credit sales. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:## Supply Club Loyalty Program Analysis
**Overview:**
Supply Club, Inc. offers paper products, office supplies, and other items to businesses and consumers. A new loyalty program was launched in July 2021, allowing customers to earn and redeem points for discounts. Redeeming a loyalty point reduces prices by 20% on future purchases. No additional points are given on purchases where points are redeemed.
**Key Details:**
- **Probability of Redemption:** 80% likely that issued points will be redeemed.
- **July 2021 Activity:** Recorded $136,000 in revenue and awarded 150,000 loyalty points.
- **Standalone Selling Price:** $136,000 for the purchased products.
- **Sales Breakdown:** 75% cash, 25% credit sales.
**Requirements:**
Prepare journal entries for July and August sales. In August, customers redeemed points on $96,000 of merchandise. Sales composition remains 75% cash and 25% credit.
**Instructions:**
- **Journal Entry Worksheet:** Fill out transactions by entering debits before credits.
- **Transactions:** No journal entry is necessary if not required for an event.
### Visual Explanation:
**Journal Entry Worksheet:**
- **Tabs:** Two tabs for entering journal entries.
- **Fields:**
- Transaction number
- General Journal details
- Debit column
- Credit column
- **Actions:**
- Record entry
- Clear entry
- View general journal
This setup helps in accurately recording and reconciling transactions related to the loyalty program.
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