Fauciboss Sports is a local outdoor store that competes with Bass Pro Shops, Gander Mountain, etc. on the basis of service and customer loyalty. Two of their marketing plans follow (consider them independently of each other):

• Fauciboss sells a deer tree stand that is well suited to the local forest area. They take a standard tree stand and modify it to work with the evergreens that make up most of the local woods.
  • Fauciboss sold 90 of these stands during 2020 at $500 each.
  • The stands are warrantied for 3 years with regards to manufacturing defects.
  • In addition to the sales of the stands, Fauciboss sold extended warranties for 25 stands that added 2 years to the covered period.
    • These extended warranties were sold for $200 each.
    • Fauciboss estimates that they will incur $2,500 of total cost servicing the 3-year standard warranty for the 90 stands sold during 2020.
• Fauciboss has a customer loyalty program that “rewards” a customer with one point for every $10 of purchases.
  • Each point is redeemable for $1.00 off of any purchases from Fauciboss over the following two years.
  • During 2020 Fauciboss’s customers bought $110,000 of products and earned 11,000 points.
  • The standalone selling price of the products was $110,000.  
  • Based on prior years’ experience, Fauciboss expects 9,800 of the 11,000 points to be redeemed.

Required:

1. Prepare the journal entries for the 2020 sale of the tree stands and related warranties.
2. Fauciboss incurred $400 of warranty costs during 2020 relating to the 2020 sales. Prepare the journal entry to record the incurrence of those costs and prepare any 12/31/20 adjusting journal entry needed.
3. Prepare journal entries related to the bonus point sales for 2020.
4. Fauciboss recognizes how much additional revenue in 2021 assuming 5,600 of the points earned in 2020 are redeemed?

Answer rating: 100% (QA)

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