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answer D Identifying and Recording Customer Option for Additional Merchandise Pets Inc. launches a new advertising promotion where, for each purchase over $ 3 0

answer D
Identifying and Recording Customer Option for Additional Merchandise
Pets Inc. launches a new advertising promotion where, for each purchase over $30, it offers a coupon for a
35% discount on a future purchase. There is a limit of one coupon per customer. Pets Inc. estimates that 28%
of customers receiving the coupon will redeem the coupon on an average purchase of $24. Sales on the first
day of the one-week promotional period totaled $320,000 resulting in 3,200 coupons distributed. Assume all
sales were cash sales. Cost of sales is 45% of the selling price.
a. Determine how many performance obligations are included in a sales transaction during the advertising
promotion program. Assume that coupons readily available to the public online or in company fliers have a
maximum discount of 20%.
Two performance obligations
b. Record the journal entry to record revenue in the first day of the promotion period using the relative
percentages to allocate standalone selling prices.
-Note: Carry all decimals in calculations; round the final answer to the nearest dollar.
c. Only 25% of the coupons were redeemed during the redemption period on qualifying purchases of $18,400.
Record the entry for the redemption of the coupons, ignoring the cost entries.
d. If the coupons, instead, offered 20% on future purchases (otherwise, same facts as before), how would the
answers change to parts a and b, if at all?
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