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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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?
Step by step
Solved in 2 steps with 2 images
- Cash Rebates On January 1, 2020, Fro-Yo Inc. began offering customers a cash rebate of 5.00 if the customer mails in 10 proof-of-purchase labels from its frozen yogurt containers. Eased on historical experience, the company estimates that 20% of the labels will be redeemed. During 2020, the company sold 5,000,000 frozen yogurt containers at 1 per container. From these sales, 800,000 labels were redeemed in 2020, 150,000 labels were redeemed in 2021, and the remaining labels were never redeemed. Required: 1. Prepare the journal entries related to the sale of frozen yogurt and the cash rebate offer for 2020 and 2021. 2. Next Level Assume that 300,000 labels were redeemed in 2021. Prepare the journal entries related to the cash rebate offer for 2021.Premium Obligation Yummy Cereal Company is offering one toy shovel set for 15 box tops of its cereal. Year-to-date sales have been off, and it is hoped that this offer will stimulate demand. Each shovel set costs the company 3. The following data are available for the last 3 months of 2019: It is estimated that only 70% of the box tops will be redeemed. The cereal sells for 2.80 per box. Required: 1. Prepare journal entries for each month to record sales, shovel set purchases, and redemptions. 2. Assuming Yummy prepares monthly financial statements, indicate how the inventory of premiums and the estimated liability would be disclosed on Yummys ending balance sheets for October, November, and December.Topic: Premium Liability Problem 2-20 William Company operates a customer loyalty program. The entity grants loyalty points for goods purchased. The loyalty points can be used by the customers in exchange for goods of the entity. The points have no expiry date. During 2020, the entity issued 100,000 award credits and expects that 80% of these award credits shall be redeemed. The total stand-alone selling price of the award credits granted is reliably measured at P2,000,000. In 2020, the entity sold goods to customers for a total consideration of P8,000,000 based on stand-alone selling price. The award credits redeemed and the total award credits expected to be redeemed each year are as follows Redeemed Expected to be redeemed 2020 30,000 80% 2021 15,000 90% Solve for the following: The revenue from points for 2020 The revenue from points for 2021
- 1. IRIS Department Store sells gift certificates that are redeemable only when the merchandise is purchased from its stores. It is the company’s policy to recognize the amount redeemed as realized. During 2019, ABC Department Store sold gift certificates amounting to P1,800,000 and redeemed gift certificates worth P1,560,000. Gift certificates outstanding at January 1, 2019, is P520,000. The company’s gross profit rate is 40%. What is the liability for outstanding gift certificates at December 31, 2019? 2. On January 1, 2020, HEYO Company issued P 10,000,000 convertible bonds with a stated rate of 12% at 110. The principal of the bonds is payable on December 31, 2024. Interest on the bonds is payable annually starting December 31, 2020. Each P 5,000 bond is convertible into 20 ordinary shares of P 50 par. Without the bond conversion privilege, the bonds would have sold to yield 10%. On December 31, 2021, after paying periodic interests, half of the bonds issued were converted to…11. PEANUTS Company, a grocery retailer operates a customer loyalty program. It grants program members loyalty points when they spend a specified amount of groceries. Program members can redeem the points for further groceries. The points have no expiry date. During the year 2020, the entity grants 100,000 points, but management expects that only 80,000 points will be redeemed. The management of PEANUTS estimates the fair value of each loyalty point to be ₱1 and defers revenue in the amount of ₱100,000. During the year 2020, the company had redeemed 40,000 points. But during the year 2021, the management revises their expectation, it now expects to redeem 90,000 points. In 2021, the company redeemed 45,000 points. What amount of revenue from the loyalty program should PEANUTS recognize for the year ended December 31, 2021? a. ₱ 20,000 b. ₱ 25,000 c. ₱ 50,000 d. ₱ 45,000A company provided a special promotion of zero-interest financing for 3 years on its products. The company received a $306,000 zero-interest-bearing note on January 1, 2020. The company imputes an 8% interest rate on this zero-interest note transaction. What is the total amount of revenue to be recognized in 2020? (Add sales revenue and interest revenue.) (Present value factor for 8% and 3 years, single sum is 0.79. Please do not use your own present value tables or financial calculator.) (Please do not round your answer in any part of the computation.)
- 4. WALNUT Department Store sells gift certificates, redeemable for store merchandise that expires one year after their issuance. WALNUT has the following information pertaining to its gift certificates sales and redemptions: Unearned at December 31, 2020 - ₱600,000; 2021 sales - ₱2,000,000; 2021 redemptions of prior-years sales -₱200,000; 2021 redemptions of current-year sales-₱1,400,000. In its December 31, 2021 statement of financial position, what amount should WALNUT report as unearned revenue? a. ₱ 800,000 b. ₱ 400,000 c. ₱ 1,000,000 c. ₱ 600,0004. WALNUT Department Store sells gift certificates, redeemable for store merchandise that expires one year after their issuance. WALNUT has the following information pertaining to its gift certificates sales and redemptions: Unearned at December 31, 2020 - ₱600,000; 2021 sales - ₱2,000,000; 2021 redemptions of prior-years sales -₱200,000; 2021 redemptions of current-year sales-₱1,400,000. In its December 31, 2021 statement of financial position, what amount should WALNUT report as unearned revenue?Question: 1. Johnson company sells a blender for $40 that costs them $16. The company provides a 5 year warranty which they will replace any blenders that quit functioning for the customers. For sales in 2021, they anticipate 1,800 blenders will be returned in for replacement. Make the journal entry for 2021 warranty expense. 2. During 2021, 1,300 blenders quit working and had to be replaced by Johnson.
- 1. WALNUT Department Store sells gift certificates, redeemable for store merchandise that expires one year after their issuance. WALNUT has the following information pertaining to its gift certificates sales and redemptions: Unearned at December 31, 2020 - ₱600,000; 2021 sales - ₱2,000,000; 2021 redemptions of prior-years sales -₱200,000; 2021 redemptions of current-year sales-₱1,400,000. In its December 31, 2021 statement of financial position, what amount should WALNUT report as unearned revenue? 2.On December 31, 2021, PISTACHIO Company had outstanding ₱20 million face value convertible bonds maturing on December 31, 2024. Interest is payable annually on December 31. Each ₱1,000 bond is convertible into 60 shares of PISTACHIO’s ₱P10 par ordinary shares. The unamortized premium balance on December 31, 2021 is ₱350,000. The balance of Share premium arising from bond conversion privilege is ₱640,000. On this date, assume that on December 31, 2021, PISTACHIO retired the ₱2,000,000 issue…PLEASE ANSWER ASAP Problem No. 4 AACA Corporation is a company engaged in buying and selling manufacturing equipment. On Jan. 1, 2020, AACA Corporation sold equipment, with a cash price of P1,500,000. The cost of the equipment is P750,000. The buyer signed a deferred payment contract that provides for a down payment of P300,000 and a 5-year note for P1,705,900. The note is to be paid in 5 equal annual payments of P341,180. The payments include interest and are made on Dec. 31 of each year, beginning on Dec. 31, 2020. AACA Corporation made the following entries in relation to the sale of the equipment and the related note receivable: Jan. 1, 2020 Cash 300,000 Notes receivable 1,705,900 Cost of goods sold 750,000 Sales 2,005,900 Inventory 750,000 Dec. 31, 2020 Cash 341,180 Notes receivable 341,180 Dec. 31, 2021 Cash 341,180 Notes receivable 341,180 AACA Corporation…7.) M.A. Sarap Restaurant sold a fastfood restaurant franchise to M.A.Takaw Corporation. The sale agreement signed on January 2, 2023, called for a P80,000 down payment plus two P10,000 annual payments representing the value of initial franchise services rendered by M.A.Sarap. The present value of two annual payments appropriately discounted at 10% is P17,355. In addition, the agreement required the franchisee to pay 5% of its gross revenues to the franchisor; this was deemed sufficient to cover the cost and provide a reasonable profit margin on continuing franchise services to be performed by M.A.Sarap. The restaurant opened early in 2023 and its sales for the year amounted to P500,000. M.A.Sarap Restaurant's 2023 total revenue from the franchisee will be:
