Question
Footwork sells a variety of footwear products. During July 2015 it started a loyalty program through which qualifying customers can accumulate points and redeem those
Footwork sells a variety of footwear products. During July 2015 it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% ( equal to 20 cents). Customers do not earn additional loyalty points for purchases on which loyalty points are redeemed. Based on past experience, Footwork estimates a 60% probability that any point issued will be redeemed for the discount. During July 2015, the company records $135,000 of revenue and awards 125,000 loyalty points. The aggregate stand alone selling price of the purchased products is $135,000. Eighty percent of sales were cash sales and the remainder were credit sales.
1. Prepare Footwork's journal entry to record July sales. (ignore COGS)
2. During August, customers redeem loyalty points on $60,000 of merchandise. Seventy five percent of those sales were for cash, and the remainder were for credit sales. Prepare the journal entry to record those sales. (ignore COGS).
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