Question
During 2020, Red Deer Corp. sold 200,000 tickets for hockey games for $ 60 each under a new sales promotion program. Each ticket contains one
During 2020, Red Deer Corp. sold 200,000 tickets for hockey games for $ 60 each under a new sales promotion program. Each ticket contains one coupon. Any person who presents 2 coupons can receive a ticket to an Edmonton Flames football game for only $ 2. Red Deer pays $ 8.00 per football ticket and at the beginning of 2020 had purchased 80,000 tickets (any tickets not used in 2020 can be used in 2021). The company estimates that 60% of the coupons will be redeemed even though only 50,000 coupons had been processed during 2020.
Instructions
a) What amount should Red Deer report as a liability for unredeemed coupons on December 31, 2020?
b) What amount of expense will Red Deer report on its 2020 income statement as a result of the promotional program?
c) Prepare any necessary 2020 journal entries related to the promotion program.
d) Explain how the accounting treatment for this promotion is treated under IFRS.
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