QUESTION 3 (20 marks) Star Soda Ltd Star Soda is a local beverage company that sells various types of carbonated drinks. The directors of the entity wanted to boost their revenue figures from the sales of their 2 litre drinks and thus introduced a one-year loyalty programme starting on 1 July 2020. The terms of the programme indicate that customers will receive 1 loyalty point for each 2-litre bottle of soda purchased. Each point is redeemable for a R1 discount on future purchases from Star Soda. The points do not have an expiry date.

During the year ended 30 June 2021, 60 000 2-litre bottles of soda were sold in cash. The selling price of each soda bottle is R12. The stand-alone selling price for each point awarded was R0.80 after taking into account the likelihood of redemption.

The following estimates have been made with regards to the percentage of the total points awarded for the 30 June 2021 year, that Star Soda expected will be redeemed based on their past experience with similar loyalty programmes:

Year ending 30 June 2021 90%

Year ending 30 June 2022 96%

Total actual points redeemed:

Year ending 30 June 2021 47 520 points in total

Year ending 30 June 2022 54 720 points in total

REQUIRED:

3.1) Identify the performance obligation(s) regarding the sale of soda under the loyalty programme. (2 marks)

3.2) Prepare the general journal entries that Star Soda Ltd will record in its records to account for all of the transactions under the loyalty programme for each of the years ending 30 June 2021 and 30 June 2022. Dates, narrations, and closing entries are not required. Ignore VAT, Income tax, and cost of sales. Show all workings. (18 marks)