What amount should be reported as sales revenue including the revenue earned from points for 2020? What is the revenue earned from loyalty points for 2021?
Topic: Premium Liability
Problem 2-21
Arianne Company, a grocery retailer, operates a customer loyalty program. The entity grants program members loyalty points when they spend a specified amount on groceries.
Program members can redeem the points for further groceries. The points have no expiry date.
During 2020, the sales amount to P7,000,000 based on stand-alone selling price.
During the year, the entity granted 10,000 points. But management expected that only 80% or 8,000 points will be redeemed.
The stand-alone selling price of each loyalty point is P100.
On December 31, 2020, 4,800 points have been redeemed
In 2021, management revised its expectations and now expected that 90% or 9,000 points will be redeemed altogether.
During 2021, the entity redeemed 2,400 points.
Questions:
- What amount should be reported as sales revenue including the revenue earned from points for 2020?
- What is the revenue earned from loyalty points for 2021?
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