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 $425,000 of merchandise (cost of $170,000) 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