Question

In: Accounting

Beaver Ltd. is a retail company that sells sporting goods. It has a customer loyalty program...

Beaver Ltd. is a retail company that sells sporting goods. It has a customer loyalty program that allows customers to earn points based on sales made. These points can be accumulated and used for future purchases. One customer loyalty point is awarded for every $1 of purchases. During March 20X4, the company recorded sales of $1,725,000 to customers who were accumulating points. The stand-alone value of these goods sold was $1,725,000. Beaver has also determined that each point has a fair value of $0.017. The loyalty account had a balance of $870,000 at the beginning of March. During the month of March, customers used 1,200,000 points to purchase goods in the store.

Required:
Prepare the entries for the above transactions for the month of March 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to nearest whole dollar.)

Solutions

Expert Solution

1 Journal entries for the month of March 20X4
Cash $1,725,000
Customer loyalty account $29,325
Sales revenue $1,725,000
Deferred Revenue $29,325
(To record sales for the month of march)
Customer loyalty points (1 for $1)             1,725,000
Fair value of each point $0.017
Fair value of 1725000 points                   29,325
Deferred Revenue                   20,400
Sales revenue                  20,400
(to record redemption of 1200000 points to purchase goods)
Customer loyalty points used             1,200,000
Fair value of each point $0.017
Fair value of 1200000 points                   20,400

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