Jupiter Inc. has a customer loyalty program that rewards a customer with 2 customer loyalty point for every $10 of purchases. Each point is redeemable for a $3 discount on any future purchases. On May 1, 2017, customers purchase products for $300,000 (with a cost of $218,000) and earn 60,000 points redeemable for future purchases. Jupiter expects 45,000 points to be redeemed. Jupiter estimates a standalone selling price of $0.80 per point (or $48,000 total) on the basis of the likelihood of redemption. The points provide a material right to customers that they would not receive without entering into a contract. As a result, Jupiter concludes that the points are a separate performance obligation.

Instructions

(a) Determine the transaction price for the product and the customer loyalty points.

(b) Prepare the journal entries to record the sale of the product and related points on May 1, 2017.

(c) At the end of the first reporting period (May 31, 2017), 15,000 loyalty points are redeemed. Jupiter continues to expect 45,000 loyalty points to be redeemed in total. Determine the amount of loyalty point revenue to be recognized at May 31, 2017