Pets Inc. launches a new advertising promotion where, for each purchase over $30, it offers a coupon for a 35% discount on a future purchase. There is a limit of one coupon per customer. Pets Inc. estimates that 28% of customers receiving the coupon will redeem the coupon on an average purchase of $24. Sales on the first day of the one-week promotional period totaled $240,000 resulting in 2,400 coupons distributed. Assume all sales were cash sales. Cost of sales is 45% of the selling price. a. Determine how many performance obligations are included in a sales transaction during the advertising promotion program. Assume that coupons readily available to the public online or in company fliers have a maximum discount of 20%. . Two performance obligations b. Record the journal entry to record revenue in the first day of the promotion period using the relative percentages to allocate standalone selling prices. Note: Carry all decimals in calculations; round the final answer to the nearest dollar. Performance Obligations Merchandise Customer option-merchandise credit Transaction Standalone Total Allocated Price Selling Transaction Price as Stated Price (rounded) 24 x $ 240,000 $ 0 x 0 0 x 0 X $ 0X $ 0 X $ $ 0 Account Name Debit Credit Contract Asset Cash 0 Accounts Receivable 0 0 X To record the sale of merchandise, Cash 0 OX Inventory 0 OX To record the cost of sale of merchandise. c. Only 25% of the coupons were redeemed during the redemption period on qualifying purchases of $13,800. Record the entry for the redemption of the coupons, ignoring the cost entries. V Debit Credit 0 Account Name Accounts Receivable Contract Asset Cash To receognize revenue, V 0 0 X 0 X V 0 d. If the coupon offered were instead 20% on future purchases (otherwise, same facts as before), how would the answers change to parts a and b, if at all? Debit Credit 0 OX 0 0 x Account Name Contract Asset Accounts Receivable To record the sale of merchandise. Deferred Revenue Cash To record the cost of sale of merchandise V 0 0 X 0 0 x Pets Inc. launches a new advertising promotion where, for each purchase over $30, it offers a coupon for a 35% discount on a future purchase. There is a limit of one coupon per customer. Pets Inc. estimates that 28% of customers receiving the coupon will redeem the coupon on an average purchase of $24. Sales on the first day of the one-week promotional period totaled $240,000 resulting in 2,400 coupons distributed. Assume all sales were cash sales. Cost of sales is 45% of the selling price. a. Determine how many performance obligations are included in a sales transaction during the advertising promotion program. Assume that coupons readily available to the public online or in company fliers have a maximum discount of 20%. . Two performance obligations b. Record the journal entry to record revenue in the first day of the promotion period using the relative percentages to allocate standalone selling prices. Note: Carry all decimals in calculations; round the final answer to the nearest dollar. Performance Obligations Merchandise Customer option-merchandise credit Transaction Standalone Total Allocated Price Selling Transaction Price as Stated Price (rounded) 24 x $ 240,000 $ 0 x 0 0 x 0 X $ 0X $ 0 X $ $ 0 Account Name Debit Credit Contract Asset Cash 0 Accounts Receivable 0 0 X To record the sale of merchandise, Cash 0 OX Inventory 0 OX To record the cost of sale of merchandise. c. Only 25% of the coupons were redeemed during the redemption period on qualifying purchases of $13,800. Record the entry for the redemption of the coupons, ignoring the cost entries. V Debit Credit 0 Account Name Accounts Receivable Contract Asset Cash To receognize revenue, V 0 0 X 0 X V 0 d. If the coupon offered were instead 20% on future purchases (otherwise, same facts as before), how would the answers change to parts a and b, if at all? Debit Credit 0 OX 0 0 x Account Name Contract Asset Accounts Receivable To record the sale of merchandise. Deferred Revenue Cash To record the cost of sale of merchandise V 0 0 X 0 0 x
