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XYZ Inc. has a customer loyalty program that rewards customers with one customer loyalty point for every $100 of purchases. Each point is redeemable for
XYZ Inc. has a customer loyalty program that rewards customers with one customer loyalty point for every $100 of purchases. Each point is redeemable for a $2.50 discount on future purchases. On April 1 , 2021 , customers purchase products for $420,000 (with a cost of $210,000 ) and earn 4,200 points redeemable for future purchases. XYZ expects 3,500 points to be redeemed (based on its past experience, which is predictive of the amount of consideration to which it will be entitled). XYZ estimates a stand-alone selling price of $2 per point 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, XYZ concludes that the points are a separate performance obligation. Required: a) Determine the transaction price for the product and the customer loyalty points. Round percentage allocations to two decimals and final amounts to the nearest dollar. b) Prepare the journal entries to record the sale of the product and related points on April 1, 2021. c) At the end of the first reporting period April 30, 2021, 1,500 loyalty points are redeemed. XYZ continues to expect 3,500 loyalty points to be redeemed in total. Determine the amount of loyalty point revenue to be recognized at April 30, 2021. Prepare the journal entry for cash sales on April 30, 2021, assuming the points were applied to cash sales of $100,000 with cost of $52,000. Round the calculation of revenue per point to three decimal places
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