Question
A large clothing retailer chain, Kolls, offers a sales incentive program where customers receive direct credit toward future purchases based upon the dollar amount of
A large clothing retailer chain, Kolls, offers a sales incentive program where customers receive direct credit toward future purchases based upon the dollar amount of purchases today. For every $50 spent today, the customer will earn a $6 credit to be used at Kolls in two weeks. The credit expires 5 days after it becomes active. Not all customers will redeem the credit in the 5-day window of time. Based upon historical trends, Kolls estimates that 35% of the credits will be redeemed. a. Determine how many performance obligations are included in a sales transaction during the sales incentive program. AnswerOne performance obligationTwo performance obligationsThree performance obligationsFour performance obligationsNo performance obligations b. Assuming that Kolls sold $475,000 of merchandise (cost of $190,000) during the first day of the sales incentive period, record the journal entry(ies) to record sales revenue. Assume all sales were cash sales. Note: Carry all decimals in calculations; round the final answer to the nearest dollar.
Transaction | Standalone | Total Allocated | |
---|---|---|---|
Performance | Price | Selling | Transaction Price |
Obligations | as Stated | Price | (rounded) |
Merchandise | |||
Customer optionmerchandise credit | |||
Account Name | Debit | Credit | |
---|---|---|---|
Accounts ReceivableCashContract AssetPrepaid ExpenseCost of Goods SoldAccounts PayableDeferred RevenueInventorySales RevenueN/A | |||
Accounts ReceivableCashContract AssetPrepaid ExpenseCost of Goods SoldAccounts PayableDeferred RevenueInventorySales RevenueN/A | |||
Accounts ReceivableCashContract AssetPrepaid ExpenseCost of Goods SoldAccounts PayableDeferred RevenueInventorySales RevenueN/A | |||
To record the sale of merchandise | |||
Accounts ReceivableCashContract AssetPrepaid ExpenseCost of Goods SoldAccounts PayableDeferred RevenueInventorySales RevenueN/A | |||
Accounts ReceivableCashContract AssetPrepaid ExpenseCost of Goods SoldAccounts PayableDeferred RevenueInventorySales RevenueN/A | |||
To record the cost of sale of merchandise |
c. Record a summary entry to recognize revenue (if any) during the 5-day merchandise credit redemption period, assuming that 35% of the credits are redeemed.
Account Name | Debit | Credit | |
---|---|---|---|
Accounts ReceivableCashContract AssetPrepaid ExpenseCost of Goods SoldAccounts PayableDeferred RevenueInventorySales RevenueMerchandise CreditSales RevenueUnused Merchandise CreditN/A | |||
Accounts ReceivableCashContract AssetPrepaid ExpenseCost of Goods SoldAccounts PayableDeferred RevenueInventorySales RevenueMerchandise CreditSales RevenueUnused Merchandise CreditN/A | |||
To receognize revenue. |
d. Record a summary entry to recognize revenue (if any) at the conclusion of the 5-day merchandise credit redemption period, assuming that no credits are redeemed.
Account Name | Debit | Credit | |
---|---|---|---|
Accounts ReceivableCashContract AssetPrepaid ExpenseCost of Goods SoldAccounts PayableDeferred RevenueInventorySales RevenueMerchandise CreditSales RevenueUnused Merchandise CreditN/ANo list available | |||
Accounts ReceivableCashContract AssetPrepaid ExpenseCost of Goods SoldAccounts PayableDeferred RevenueInventorySales RevenueMerchandise CreditSales RevenueUnused Merchandise CreditN/ANo list available | |||
To receognize revenue. |
Please answer all parts of the question.
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