Course Content I Chapter $7$ I Chapter $7$ Homework

Chapter $7$ Homework

Identifying and Recording Customer Option for Additional Merchandise

Pets Inc. launches a new advertising promotion where, for each purchase over $$30,$ it offers a coupon for a $35\%$ discount on a future purchase. There is a limit of one coupon per customer. Pets Inc. estimates that $28\%$ of customers receiving the coupon will redeem the coupon on an average purchase of $$24.$ Sales on the first day of the one$-$week promotional period totaled $$480,000$ resulting in $4,800$ coupons distributed. Assume all sales were cash sales. Cost of sales is $45\%$ of the selling price.

a$.$ Determine how many performance obligations are included in a sales transaction during the advertising promotion program. Assume that coupons readily available to the public online or in company fliers have a maximum discount of $20\%.$

b$.$ Record the journal entry to record revenue in the first day of the promotion period using the relative percentages to allocate standalone selling prices. $-$Note: Carry all decimals in calculations; round the final answer to the nearest dollar.

$\backslash$table$[[$Account Name,,Debit,Credit$],[$Cash$,v,480,000,0],[$Sales Revenue,$v,0,30,192],[$Deferred Revenue$-$Merchandise Credil,$v,0,0],[$To record the sale ormerchandise.$],[$Cost of Goods Sold,$v,216,000,0],[$Inventory$,v,0,216,000],[$To record the cost of sale of merchandise,,,$]]$

c$.$ Only $25\%$ of the coupons were redeemed during the redemption period on qualifying purchases of $$27,600.$ Record the entry for the redemption of the coupons, ignoring the cost entries.

$\backslash$table$[[$Account Name,,Deble,Credit$],[$Delerred Revenue$-$Merchandise Credit,$v,0,],[$Sales Revenue$-$Merchandise Credit,$v,0,0],[$Sales Revenue$-$Unused Merchandise Gredil,$v,0,0],[$To receognize revenue,,,,$]]$

d$.$ If the coupons, instead, offered $20\%$ on future purchases $($otherwise$,$ same facts as before$),$ how would the answers change to parts a and b$,$ if at all?