SOCK SHOP Inc. began operating on September 1, 2022. SOCK SHOP follows IFRS and prepares adjusting entries monthly. SOCK HOP offers a loyalty program under which for every 12 pairs of hosiery a customer purchases they are eligible to receives one pair free. Based on industry data, 80% of customers are expected to redeem the free pair. All socks sell for $12 per pair. In January 2022, 960 pairs of socks were sold for cash and 40 free pairs were redeemed. Cost of product provided to customers was $4,000. Required: a) Calculate SOCK SHOP's gross profit in September 2022 b) Calculate SOCK HOP's redemption liability under the loyalty plan at its September 30, 2022 month end.

SOCK SHOP Inc. began operating on September 1, 2022. SOCK SHOP follows IFRS and prepares adjusting entries monthly. SOCK HOP offers a loyalty program under which for every 12 pairs of hosiery a customer purchases they are eligible to receives one pair free. Based on industry data, 80% of customers are expected to redeem the free pair. All socks sell for $12 per pair. In January 2022, 960 pairs of socks were sold for cash and 40 free pairs were redeemed. Cost of product provided to customers was $4,000. Required: a) Calculate SOCK SHOP's gross profit in September 2022 b) Calculate SOCK HOP's redemption liability under the loyalty plan at its September 30, 2022 month end.

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

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 18E: On December 1, 2019, AwakcAllNight Inc. sells 5,000 super caffeinated candy bars to Campus Grocers....

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