Question

To increase sales, Monty Inc., a public company following IFRS, implemented a customer loyalty program that rewards a customer with one loyalty point for every $30 of merchandise purchased. Each point is redeemable for a $2 discount on any purchases of Monty merchandise in the next three years. After the program launched, during 2020, customers bought merchandise for $330,000 (all products are sold to provide a 40% gross profit) and earned 11,000 points redeemable for future purchases. The stand-alone selling price of the merchandise sold is $330,000. Based on prior experience with incentive programs like this, Monty expects 8,000 points to be redeemed related to these sales. Prepare the journal entries for cash sales including the issuance of loyalty points for Monty in 2020. (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 o for the amounts. Round percentage allocations to 2 decimal places, e.g. 52.75 and final answers to o decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit (To record cash sales of products subject to loyalty points) (To record cost of goods sold) SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Would the accounting of the customer loyalty program be different if Monty had been following ASPE?

Answer 1

Accounts Titles and Explanation	Debit	Credit
Cash	$330,000
Unearned Revenue		$7,811
Sales Revenue		$322,189
(To record cash sales of the product subject to loyalty points)
Cost of Goods Sold ($330,000 x 60%)	$198,000
Inventory		$198,000
(To record cost of goods sold)
Working
	Standalone Price	Proportion	Total price	Amount Allocated
Merchandise	$330,000	97.63%	$330,000	$322,189
The estimated value of points	$8,000	2.37%	$330,000	$7,811
	$338,000			$330,000