Skyrock Specialities sells premium ice cream from a portable trailer located in a busy public park. To promote sales, the business has created a loyalty program. If a customer buys nine cups of ice cream, the tenth will be free. Each cup of ice cream sells for $2.70. In 2020, they sold 36, 000 cups of ice cream and redeemed 1,000 free cups. The $2.70 sales price would thus include both the sales price realized at sale as well as the expected future loyalty revenue that is unearned. The business expects that another 1,000 free cups will be redeemed in the future. They also expect that any remaining free cups will be forfeited as the loyalty card expires one year after the first purchase.

Skyrock uses IFRS-15 to account for various identifiable components making up the sales revenue.

Required:

1) Prepare the journal entries for the current year with respect to the sales and loyalty program.

2) Compute the amount of liability to be reported at the end of the current year with respect to the loyalty program.

Answer rating: 100% (QA)

Sales consideration 36000 x 270 97200 to be allocated between Sales Revenue and loy... View the full answer