NutriMart, Inc., a reknown health food chain, launches a promotional campaign on January 1, 2021, offering customers
Question:
NutriMart, Inc., a reknown health food chain, launches a promotional campaign on January 1, 2021, offering customers a free blender in exchange for 150 reward points. Customers earn 1 reward point for every $25 spent on eligible purchases at any NutriMart store during the promotional period. The blenders can be redeemed within 18 months from the date of issue. In anticipation of this campaign, NutriMart purchases a premium inventory of 10,000 blenders during December 2020 at cost of $12 per blender. Sales eligible for reward points amounted to $7.5 million in 2021. The company estimates that 40% of the reward points issued will be redeemed in 2021 and 25% in 2022. During 2021, 110,000 reward points are presented for redemption. Similarly, in 2022, consumers redeemed 60,000 reward points. NutriMart follows ASPE. Assume the company charges the full estimated cost of the premium plan when the sales are recognized.
Determine the amount of promotion liability reported on the Balance Sheet as at December 31, 2021, and specify its classification.
Accounting Principles
ISBN: 978-1119419617
IFRS global edition
Authors: Paul D Kimmel, Donald E Kieso Jerry J Weygandt