Loveshine

Loveshine is an Australian retailer that sells skincare, make-up, hair care and body products. It only sells products that meet its strict ethical and environmental standards.

Loveshine does not sell products that are harmful to the environment (eg those that contain toxic ingredients or are packaged in single-use plastic). The company maintains an ethical supply chain that produces no harmful impacts on people or animals.

Loveshine provides consumers with information about their products to help consumers make ethical, environmentally friendly and well-considered choices with their purchase from Loveshines online and retail stores.

Loveshine has developed its own range of personal care products called Naturelove. This range includes shampoo, conditioner, toothpaste and beauty creams. All products in the Naturelove range are produced under the highest ethical standards and contain no toxic ingredients. All Naturelove packaging can be composted or returned for recycling at Loveshines retail stores.

The corporate tax rate applicable to Loveshine is 30%.

Promotional activities

Loveshine runs several sales promotions each year, including an annual promotion each June to mark World Environment Day. On World Environment Day, 29 June 2022, Loveshine ran the following special promotion:

Customers who spent over $100 were issued with a discount voucher for 40% off the cost of their next purchase at an Loveshine store. 500 discount vouchers were issued to eligible customers. The discount vouchers have a 3-month expiry date.

Based on experience, Loveshine estimates that 80% of the customers who were issued discount vouchers will use the vouchers and spend an average of $75 (pre-discount) when redeeming the voucher.

Revenue is assessable by the tax authority when the cash is received

Required

(a) A $200 cash sale of goods was made to a customer during Loveshines 29 June 2022 World Environment Day promotion. Apply steps 24 of the revenue recognition model under IFRS 15 Revenue from Contracts with Customers (IFRS 15) to the sale. Show all workings and explanations. Include specific references to IFRS 15 in your explanations. (b) Prepare the journal entry for the year ended 30 June 2022 to recognise the cash sale of goods in part (a). (c) Prepare the journal entry at 30 June 2022 to recognise the deferred tax impact of the discount voucher issued to the customer for the sale in part (a). Show all workings.