Question
Bass hunt is a local outdoor store that competes with other outdoor stores. They are proposing two marketing plans follow (consider them independent of each
Bass hunt is a local outdoor store that competes with other outdoor stores.
They are proposing two marketing plans follow (consider them independent of each other)
Plan 1: They sell a deer tree stand. they take a standard tree and modify it to make it work.
- They sold 80 stands during 2018 for $400 each
- the stands are warrantied for 3 years (manufacture defects)
- the company's purchase cost per stand is $250 and they spent another $3,000 modifying the 80 stands.
- in addition to the sale of the stand, they sold extended warranties for 20 stands that added 2 years to the period.
- the extended warranty was sold for $250 each
- the company estimates that they will incur $2,600 of total cost servicing the 3 year standard warranty for the 80 stands sold during 2018.
Plan 2: they have a customer royalty program that "rewards" customer with one point for every $10 purchase.
- each point is redeemable for $1.00 off any purchase from the store in the next two years.
- during 2018, customers bought $100,000 of products and earned 10,000 points.
- the standalone selling price of the products was $100,000
- based on previous data, they expect 9,400 of the points to be redeemed from the 10,000
Required:
A- prepare journal entries for the 2018 sale of tree stands and warranty.
B- The company incurred $350 of warranty cost during 2018 relating with 2018 sales. prepare journal entry to record the incurrence of these costs and prepare any 12/31/18 adjusting entries.
C- prepare journal entries related to bonus point sales for 2018.
D- How much will the company recognize additional revenue in 2019 assuming 4,600 of the 2018 points are redeemed.
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