City Goods Limited (CG) is a sports clothing and equipment

City Goods Limited (CG) is a sports clothing and equipment retailer that has a chain of 10 stores across Canada. You have just been hired as the new controller for the company. You are currently meeting with the CFO to discuss some accounting-related topics that have arisen in the preparation of the company's January 31, 2021 financial statements. CG is a private company. The following is a summary of your notes from this meeting. 

1. Customer loyalty program: In this fiscal year, the company implemented a new customer loyalty program that grants “CG points” to members based on the amount they spend in the store. The points have no expiry date and can be redeemed against future purchases in the store. The company has already determined that the fair value of each point is $0.50. During the year, 700,000 points were awarded to members, of which 80,000 were subsequently redeemed for purchases in the stores. The company anticipates that 90% of the points will be redeemed at some point in time. 

2. The company entered into an agreement on April 1, 2017, to lease a retail location for five years. In December 2020, CG decided to close that retail location due to very poor sales. The company has not been able to sublet the premises and is not able to terminate the lease agreement. The lease payment, which includes all operating costs, is $2,300 per month. 


Instructions 

For each of the two issues above, explain the situation and the appropriate accounting treatment under ASPE and IFRS. Show any required journal entries. Where necessary, use a discount rate of 0.5% per month.

Members

  • Access to 2 Million+ Textbook solutions
  • Ask any question from 24/7 available
    Tutors
$9.99
VIEW SOLUTION

OR

Non-Members

Get help from Business Tutors
Ask questions directly from Qualified Online Business Tutors .
Best for online homework assistance.