Castelia Delights sells premium gelato from a portable trailer located in a busy public park. To promote sales, the business has created a loyalty program. If clients buy nine cups of Gelato, the tenth will be free. Each cup of gelato sells for $2.70. In 2020, they sold 36, 000 cups of gelato and redeemed 1,000 free cups. The $2.70 sales price would thus include both the sales price realized at the sale as well as the expected future royalty 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.

Castelia Delights 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)

When a sales contract has the material right that entitles the customer to receive goods or services ... View the full answer