State the amount of revenue recognized related to the customer.

Question

A home gods retailer offers a sales incentive program where customers receive credit towards future purchases based on the dollar amount of their purchases today. For every $10 spent, a customer receives a $1 credit to use in the next 30 days. Based upon historical trends, the firm estimates that 35% of the credits will be redeemed. In the next month, consistent with the firm’s estimate, 35% of the credits were redeemed. The entry recorded to account for the redemption of these credits (excluding the effect of the costs of sales entry): A.) Increases Liabilities, Increases Stockholders’ Equity B.) Increases Liabilities, Reduces Stockholders’ Equity C.) Reduces Liabilities, Reduces Stockholders’ Equity D.) Reduces Liabilities, Increases Stockholders’ Equity C.) No entry needed

Answer 1

Question

Chapter 17, Problem 11RE

To determine

State the amount of revenue recognized related to the customer.

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A home gods retailer offers a sales incentive program where customers receive credit towards future purchases based on the dollar amount of their purchases today. For every $10 spent, a customer receives a $1 credit to use in the next 30 days. Based upon historical trends, the firm estimates that 35% of the credits will be redeemed. In the next month, consistent with the firm’s estimate, 35% of the credits were redeemed. The entry recorded to account for the redemption of these credits (excluding the effect of the costs of sales entry): A.) Increases Liabilities, Increases Stockholders’ Equity B.) Increases Liabilities, Reduces Stockholders’ Equity C.) Reduces Liabilities, Reduces Stockholders’ Equity D.) Reduces Liabilities, Increases Stockholders’ Equity C.) No entry needed

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