S&H Green Stamps

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S&H Green Stamps
In the 1950 's and 1960 's supermarkets gave customers "green stamps" for every dollar of purchases at the grocery store. These stamps could then be redeemed by the customers for merchandise at an S&H warehouse.
Basically, the company (Sperry and Hutchinson) provided the stamps to the grocers who didn 't have to pay for the stamps until the month after they were given out to customers. Unused stamps could be returned to the supplier. The customer would collect the stamps in a book until enough stamps had accumulated. The customer would then visit S&H’s warehouse and redeem merchandise (e.g.. a TV, a basketball, a set of kitchen towels) for a specified number of filled stamp books.
When should S&H recognize the revenue
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Assuming that 10% of the stamps will not be redeemed, the ledger will be looks like:

Date Accounts Debits Credits
XXXX-XX Cash YYY Unearned Revenue 90%*YYY Sale 10%*YYY To record the sale of the stamps with the assumption of 10% of them will not redeemed YYYY-YY
(for each redemption) Unearned Revenue zzzzz Cash zzzzz To adjust unearned revenue to reflect earned from the redeemed stamps. Each time of redemption the amount will be register in the ledger. End of year Unearned Revenue Cash ttttt To adjust unearned revenue for the end f the year for all the stamps that was not redeemed. ttttt

Expense:
1. Matching principle - the expense, merchandise and other costs, should be matched with the revenue.
2. According to the revenues recognition in section 3:
a. If all revenue is recognized when stamps are sold, an accrual of the cost of the future premium redemptions would be necessary. In such a case, when stamp redemptions and related premium issuances occurred, the costs of the premiums would be charged to the accrued liability account.
b. If stamp sales were treated as an advance, the deferred revenue would be recognized and the matching cost of the premiums issued would be recognized with the revenue at the time of redemption.
c. Under the third alternative, some
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