Question

Supply Club, Inc., sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2018 it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% (equal to 20 cents). Customers do not earn additional loyalty points for purchases on which loyalty points are redeemed. Based on past experience, Supply Club estimates a 80% probability that any point issued will be redeemed for the discount. During July 2018, the company records $153,000 of revenue and awards 106,250 loyalty points. The aggregate stand-alone selling price of the purchased products is $153,000. Seventy percent of sales were cash sales, and the remainder were credit sales. Required: 1. & 2. Prepare Supply Club's journal entry to record July and August sales. During August, customers redeem loyalty points on $68,000 of merchandise. Seventy-five percent of those sales were for cash, and the remainder were credit sales. (Do not round intermediate calculations. If no entry is required for a particular transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet < 1 2 Record the July sales. Note: Enter debits before credits. Transaction Debit Credit General Journal Cash Accounts receivable Sales revenue Deferred revenue - loyalty points

Answer 1

Supply Club Inc.:

Journal Entries:

Transaction	General Journal	Debit	Credit
1)	Cash ($153,000*70/100)	$107,100
	Accounts Receivable ($153,000*30/100)	$45,900
	Deferred Revenue (106,250*80/100*20/100 = 17,000/(17,000+153,000) = 0.10*$153,000)		$15,300
	Sales Revenue (153,000/(17,000+153,000) = 0.90*$153,000)		$137,700
	(To record the July Sales)
2)	Cash (100%-20% = 80%*$68,000*75/100)	$40,800
	Accounts Receivable (80%*$68,000*25/100)	$13,600
	Deferred Revenue (68,000 / (106,250*80/100) *100 = 80%* $15,300)	$12,240
	Sales Revenue ($40,800 + $13,600 + $12,240)		$66,640
	(To record the August sales)

Note: As per HOMEWORKLIB RULES, the first question should be answered hence, i have answered the first question so please post the second question separately. Please do not give a nagative rating for not answering all the questions as i have followed the HOMEWORKLIB RULES.