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Note: Carryall decimals in calculations; round the final answer to the nearest dollar. Performance Obligations Product purchase S Loyalty rewards Total Transaction 280 1 Transaction Price

Note: Carryall decimals in calculations; round the final answer to the nearest dollar. Performance Obligations Product purchase S Loyalty rewards Total Transaction 280 1 Transaction Price

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Allocating Transaction Price to Performance Obligations and Recording Sales Maximum Inc. (retailer) has a loyalty program that rewards its customers one point per $1 spent. Points are redeemable for $0.20 off future purchases. A customer purchases products (cost of $196) for cash at the usual selling price of $280 and earns 280 points redeemable for $56 off future purchases of goods or services. The retailer expects redemption of 252 points or 90% of points earned. Required a. How should the transaction price be allocated among the performance obligation(s)? *Note: Carry all decimals in calculations; round the final answer to the nearest dollar. Performance Obligations Product purchase s Loyalty rewards Total Transaction Price as stated Account Name To record sale of product. 280 ✔ S To record cost of sale of product. 280 S b. Prepare Maximum's journal entry to record the $280 sale to the customer and the cost of that sale where the customer earned 280 loyalty points. *Note: If a journal entry (or a line of the journal entry) isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). > > > Standalone Selling Price << Dr. 0 0 0 0 280$ ок 280 S 0 0x 0x 0 Allocated Transaction Price (rounded) 0 0x ок 0x 0
Transcribed Image Text:Allocating Transaction Price to Performance Obligations and Recording Sales Maximum Inc. (retailer) has a loyalty program that rewards its customers one point per $1 spent. Points are redeemable for $0.20 off future purchases. A customer purchases products (cost of $196) for cash at the usual selling price of $280 and earns 280 points redeemable for $56 off future purchases of goods or services. The retailer expects redemption of 252 points or 90% of points earned. Required a. How should the transaction price be allocated among the performance obligation(s)? *Note: Carry all decimals in calculations; round the final answer to the nearest dollar. Performance Obligations Product purchase s Loyalty rewards Total Transaction Price as stated Account Name To record sale of product. 280 ✔ S To record cost of sale of product. 280 S b. Prepare Maximum's journal entry to record the $280 sale to the customer and the cost of that sale where the customer earned 280 loyalty points. *Note: If a journal entry (or a line of the journal entry) isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). > > > Standalone Selling Price << Dr. 0 0 0 0 280$ ок 280 S 0 0x 0x 0 Allocated Transaction Price (rounded) 0 0x ок 0x 0
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