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 13RE: CoolShoes sells its elite tennis shoes to sports retailers throughout the country. When introducing...

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Supply Club, Incorporated, sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2024, it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% (equal to 20 cents). Customers earn one loyalty point for each dollar of goods purchased, but do not earn additional loyalty points for purchases that are made by redeeming loyalty points. Based on past experience, Supply Club estimates a 60% probability that any point issued will be redeemed for the discount. During July 2024, the company redeemed 11,200 points and sold additional product of $140,000, so it recorded of revenue of $151,200. The aggregate stand-alone selling price of the purchased products is $151,200. Eighty percent of sales were cash sales, and the remainder were credit sales.…
Supply Club, Incorporated, sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2024, it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% (equal to 20 cents). Customers earn one loyalty point for each dollar of goods purchased, but do not earn additional loyalty points for purchases that are made by redeeming loyalty points. Based on past experience, Supply Club estimates a 60% probability that any point issued will be redeemed for the discount. During July 2024, the company redeemed 11,400 points and sold additional product of $142,500, so it recorded of revenue of $153,900. The aggregate stand-alone selling price of the purchased products is $153,900. Seventy percent of sales were cash sales, and the remainder were credit sales.…