Question: Discussion 5 - Performance Obligations, Loyalty Program To get full - credit you need to reply to the both prompt and provide a reply to

Discussion

5 -

Performance Obligations, Loyalty Program

To get full

-

credit you need to reply to the both prompt and provide a reply to one of your classmates.

Prompt

1 -

Jerry's Ice Cream Parlor is considering a marketing plan to increase sales of ice cream cones. The plan will give customers a free ice cream cone if they buy

10

ice cream cones at regular prices. Customers will be issued a card that will be punched each time an ice cream cone is purchased. After

10

punches, the card can be turned in for a free cone.

Jerry Donovan, the company's owner, is not sure how the new plan will affect accounting procedures. He realizes that the company will be incurring costs each time a free ice cream cone is awarded, but there will be no corresponding revenue or cash inflow.

The focus of this case is on how to account for revenue if the new plan is adopted. Discuss the appropriate accounting treatment for the new plan. That treatment should describe when revenue is recognized and how it will be calculated.

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