Bikes Ltd. offers customers a loyalty card whereby customers receive a stamp every time they have their bike tuned up. Upon presentation of 5 stamps, customers are entitled to receive a bike light for $5. It is expected that 75% of the stamps will be redeemed. Tune-ups cost $20 and retail for $50 each; lights cost $10 and retail for $25. 1,000 lights have been purchased as prizes. In 20X9, 6,000 tune-ups were completed and 750 lights were given out. Bikes use the residual value method to allocate the transaction price to performance obligations.

Required:

(a) Assume Bikes Ltd. is a public company using IFRS. Calculate the following balances at Bikes year ended December 31, 20X9: total revenue, premium expense, premium inventory, and unearned revenue. Clearly indicate whether each balance is a debit or credit.

(b) Assume Bikes Ltd. is a private company using ASPE. Calculate the following balances at Bikes year-ended December 31, 20X9: total revenue, premium expense, premium inventory, and estimated liability for premiums. Clearly indicate whether each balance is a debit or credit.

Answer rating: 100% (QA)

a Total revenue 6000 tuneups x 50 300000 Premium expen... View the full answer