What amount of liability must be presented in the statement of financial position relating to customer loyalty awards at December 31,2020? How much revenue is recognized as a result of the redemption of points for the year 2019? and What amount of liability must be presented in the statement of financial position relating to customer loyalty awards at December 31,2019?
ABC Company runs a department store and grants loyalty awards to its customers. For every P 100 purchase made by the customer, the customer receives a credit of 5 points equivalent to P 5. The accumulated points can be used by the customer to as part or full payment of for merchandise purchased in the future.
During the year 2019, the company made sales of P 10,000,000. The fair value of the points is equivalent to the total number of points awarded during the year. For the year 2019, ABC expects that 70,000 points will be redeemed but only 65,000 points were redeemed relating to 2019 sales.
For the year 2020, an additional 20,000 points were redeemed and ABC revised its estimate that the total number of points that will be redeemed is 90,000 points.
What amount of liability must be presented in the
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