Question
Caffeine Corner Inc. opened for business on January 1, 2022. Caffeine Corner provides a customer reward program through use of a punch card. If the
Caffeine Corner Inc. opened for business on January 1, 2022. Caffeine Corner provides a customer reward program through use of a punch card. If the customer buys 6 coffees, their 7th is free. Customers pay $2.45 for a cup of coffee. Caffeine Corner Inc. reports under IFRS and coffee sales are material. In January, 2,100 cups of coffee were served: 1,900 cups were sold and 200 free cups of coffee have been redeemed so far under the program. Based on industry data, 75% of all customers will ultimately redeem a free coffee under this type of program. (i.e., Caffeine Corner is expecting further free cups of coffee will be redeemed in future months.)
Required: (a) What is the TOTAL revenue recorded by Caffeine Corner for January 2022?
(b) What is the liability recorded relating to this program at January 31, 2022?
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