All Mart Inc. (AMI) rewards its frequent shoppers with gift cards. The premium program awards members one point for every dollar spent. AMI provides members with a $20 gift card for every 1,000 points redeemed, which can then be used to purchase additional merchandise at AMI. (Normally additional merchandise is purchased right after obtaining the gift cards). Additional information is as follows: -Points expire six years after they have been earned. 80% of the points are expected to be redeemed, points represent a separate revenue stream. In 2020 AMI cash sales totalled $15,000,000, no sales are on account. -AMI's markup on cost is a constant 50% (ie: items costing $1 are sold for $1.50) -In 2021 AMI customers redeemed 3,000,000 of the 2020 points earned; -In 2022, AMI customers redeemed 4,500,000 of the 2020 points earned. Required: 1) Compute the amount of expected gift cards redeemable from the cash sales. 2) Prepare a journal entry to record revenue transactions in 2020; 3) Prepare journal entries to record premium revenue and costs in 2021 and 2022
All Mart Inc. (AMI) rewards its frequent shoppers with gift cards. The premium program awards members one point for every dollar spent. AMI provides members with a $20 gift card for every 1,000 points redeemed, which can then be used to purchase additional merchandise at AMI. (Normally additional merchandise is purchased right after obtaining the gift cards). Additional information is as follows: -Points expire six years after they have been earned. 80% of the points are expected to be redeemed, points represent a separate revenue stream. In 2020 AMI cash sales totalled $15,000,000, no sales are on account. -AMI's markup on cost is a constant 50% (ie: items costing $1 are sold for $1.50) -In 2021 AMI customers redeemed 3,000,000 of the 2020 points earned; -In 2022, AMI customers redeemed 4,500,000 of the 2020 points earned. Required: 1) Compute the amount of expected gift cards redeemable from the cash sales. 2) Prepare a journal entry to record revenue transactions in 2020; 3) Prepare journal entries to record premium revenue and costs in 2021 and 2022
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter9: Current Liabilities And Contingent Obligations
Section: Chapter Questions
Problem 21E: Cash Rebates On January 1, 2020, Fro-Yo Inc. began offering customers a cash rebate of 5.00 if the...
Related questions
Question
godo
subject-Accounting
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning