Cheap Travel Inc. (CTI), a public company, sells mini-luggage sets to Canadians for travel. CTI is offering a promotion during the month of July and August in which customers who spend a minimum of $1,000 on a luggage set will receive $150 Luggage Dollars that can be applied to their next online purchase. The Luggage dollars expire on November 1 and cannot be redeemed for cash. CTI has not offered similar promotions in the past and does not have an established accounting policy for such promotions. CTIs gross profit margin is approximately 45% and CTI uses a perpetual inventory system.

Required: (FROM THE PERSPECTIVE OF CTI) a) Assume a customer purchases $1,600 of luggage during the promotion and as such receives $240 Luggage Dollars . Prepare all journal entries to account for the transaction.

b) Assume the customer in (a) above purchases items online valued at $300 on October 1 and redeems the Luggage Dollars sold above at the same time. Prepare all journal entries that captures all the events described herein.