Question

• Starting on Jan 1, 2020, for each Apex-10 machine purchased, the customer receives a coupon for $3000 to be applied to a future purchase of another Apex-10 machine. The coupons expire on Dec 31, 2022.
• During 2020, sold 75 machines at a selling price of $60,000 each (included in 2020 revenue)
• @ the end of 2020, no coupons had been redeemed. However, since the sales were made to long-standing customers, the company was anticipating a 100% redemption rate in coming years.

Prepare the Journal entries and calculations.

Answer 1

ANSWER

calculations for coupon

for each Apex-10 machine purchased acustomer receives a coupon for $3000

during 2020 sold 75 machines then coupons worth is =75*$3000= 225,000

Sales value during the year 2020 =75*60,000=$4,500,000

sales value already recorded in in books included in revenue .so coupon value can be transfer to profit&loss A/C

JOURNAL ENTRY

Profit or loss A/C DR $225,000

To coupon issued on sales $225000

(being coupons issued  anticipating a 100% redemption rate in coming years.)

additional information

at the time of sale during the year 2020 the company made the entry

Bank A/C DR $4,500,000

TO Sales A/C $4,500,000