Question
Coffee Caf opened for business on January 1, 2020. Coffee Caf provides a customer reward program through use of a punch card. If the customer
Coffee Caf opened for business on January 1, 2020. Coffee Caf provides a customer reward program through use of a punch card. If the customer buys 4 coffees, their 5th coffee is free. Customers pay $2 for a cup of coffee. Coffee Caf reports under IFRS and coffee sales are material.
In January, 2000 cups of coffee were sold for cash and an additional 100 free cups of coffee were provided that were redeemed so far under the program. (2100 cups of coffee provided in total.)
Based on industry data, 60% of all customers will ultimately redeem a free coffee under this type of program. (ie. Caf is expecting further free cups of coffee will be redeemed in future months.)
Required: (a) What is the TOTAL revenue recorded by Coffee Caf for January 2020?
b) What is the liability recorded relating to this program at January 31, 2020?
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Financial and Managerial Accounting the basis for business decisions
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
16th edition
0077664078, 978-0077664077, 78111048, 978-0078111044
