Question

To increase sales, Whispering Winds Inc., a public company following IFRS, implemented a customer loyalty program that rewards a customer with 1 loyalty point for every $10 of purchases on a select group of products. Each point is redeemable for a $1 discount on any purchases of Whispering Winds merchandise in the next two years. Following the implementation of the program, during 2020, customers purchased select group products for $100,000 and earned 10,000 points redeemable for future purchases. (All products are sold to provide a 55% gross profit.) The stand-alone selling price of the purchased products is $100,000. Based on prior experience with incentive programs like this, Whispering Winds expects 9,500 points to be redeemed related to these sales. (Whispering Winds appropriately uses this experience to estimate the value of future consideration related to bonus points.)

1) Identify the separate performance obligation in the Whispering Winds bonus point programs. (Round answers to 0 decimal places, e.g. 5,125. Do not round intermediate calculations.)

Products		$
Bonus points		$

2) LIST OF ACCOUNTS:

Prepare the journal entries for cash sales including the issuance of bonus points for Whispering Winds 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 for the amounts.) Account Titles and Explanation Debit Credit (To record cash sale) (To record cost of goods sold)

Answer 1

Solution: 1

Identify the separate performance obligation in the Whispering Winds bonus point programs.

Sale of $100,000 will be distributed to Product and Bonus point:

As given in question, Customer purchased group products Loyalty Points expects to be redeemed Total 9,500 Points $100,000 $9,500 $109,500 Product = ($100,000/$109,500) * $100,000 = $91,324 Bonus Point = ($9,500 /$109,500) * $100,000 = $8,676

Solution: 2

Below are the required journal entries

Credit Working Debit 100,000 Account Title & Explanation Cash Sales revenue Unearned revenue |(To record cash sales.) 91,324 8,676 45,000 ($100,000 * (100-55)%) Cost of goods sold Inventory (To record cost of goods sold.) 45,000