A retailer offers a loyalty program where customers earn points worth $0.10 per point. In a month, $500,000 in sales are made, earning 50,000 points.

1. How much should be deferred as a liability for the loyalty points?
2. How much revenue should be recognized from the sales initially?
3. How should the redemption of points affect the revenue recognition?
4. How should the retailer record the loyalty points in their financial statements?