Question
Some Fresh Supplies (SFS), an entity that follows ASPE, is a chain of convenience stores. To encourage customers to regularly buy its products, customers registered
Some Fresh Supplies (SFS), an entity that follows ASPE, is a chain of convenience stores. To encourage customers to regularly buy its products, customers registered in SFS's loyalty program receive one Supply Buck for each dollar spent at any of SFS's outlets. The Supply Buck program is run by a third-party provider that permits participants to exchange points for merchandise and services. SFS pays the third-party operator $0.02 per Supply Buck earned on behalf of its customers. SFS has seen statistics that suggest that only 70% of the points awarded in the rewards program are ever exchanged for goods and services. In April SFS had sales totalling $2,200,000 and awarded 1,600,000 Supply Bucks to its registered customers. The cost of the goods sold was $1,800,000. The next month, on May 16, SFS paid the third-party provider for the points awarded in April.
What amount should SFS recognize as an expense on its April income statement pertaining to the Supply Buck program?
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