Question

A franchise of automotive technicians has a contract arrangement for a rewards program with a car manufacturing company called BMC. For every $4.00 of services performed by an automotive technician at anyone of the franchise locations, the customer is awarded Car Dollars. The Car Dollars can be redeemed towards the purchase of a motor vehicle manufactured by BMC. In total the automotive technicians performed $18,880,000 worth of services in 2020. BMC have estimated the stand-alone selling price of $0.35 and for each Car Dollar awarded, the automotive technicians will pay $0.30 to the BMC for each Car Dollar awarded to its customers.

Prepare the journal entry for the automotive technician franchise. (Hint use the information to your solution for "a" and "b" to assist with this journal entry). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Debit Account Titles and Explanation Credit

Answer 1

Particulars	Debit	Credit
Bank A/c Dr To Sales To Gift Expense (Sale recorded )	18,880,000	17,464,000 1,416,000
Gift Expense A/c Dr. To Bank (Car dollar purchased)	1,416,000	1,416,000
BMC A/c Dr To Commission Income A/c (Commission booked @0.05)	236,000	236,000