Pepperoni's Pizzas (PP) runs a promotional campaign in the fall (Sept-Dec): Eat and Win. PP special...

 

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Pepperoni's Pizzas (PP) runs a promotional campaign in the fall (Sept-Dec): Eat and Win. PP special orders 15,000 pizza boxes of which 1,500 entitle the customer to a prize ranging from a free pizza to a lovely new bicycle. Approximately 90% of winners will be returned for prizes. The total value of prizes purchased for Eat and Win is $45,000 (PP purchased for $36,000). Each pizza costs PP $5 and sells for $15. PP's year end is December 31. The 2021 campaign is now over and all the promo boxes have been given out, but only 70% of the boxes have been redeemed for $25,000 (cost) in prizes. PP still estimates that 90% of winners will be returned, but that these remaining boxes will be returned in the new year. PP uses the residual method to allocate the transaction price to performance obligations. Required: (1) Assume PP is a public company using IFRS. What is the premium revenue per box? What is the balance in unearned revenue at the end of December 2021? What will be recorded as gross profit in the fiscal year ended 2021 relating to the promo pizzas? (2) Assume PP is a private company using ASPE. What is the balance in estimated liability for premiums at the end of December 2021? What will be recorded as gross profit in the fiscal year ended 2021 relating to the promo pizzas? Pepperoni's Pizzas (PP) runs a promotional campaign in the fall (Sept-Dec): Eat and Win. PP special orders 15,000 pizza boxes of which 1,500 entitle the customer to a prize ranging from a free pizza to a lovely new bicycle. Approximately 90% of winners will be returned for prizes. The total value of prizes purchased for Eat and Win is $45,000 (PP purchased for $36,000). Each pizza costs PP $5 and sells for $15. PP's year end is December 31. The 2021 campaign is now over and all the promo boxes have been given out, but only 70% of the boxes have been redeemed for $25,000 (cost) in prizes. PP still estimates that 90% of winners will be returned, but that these remaining boxes will be returned in the new year. PP uses the residual method to allocate the transaction price to performance obligations. Required: (1) Assume PP is a public company using IFRS. What is the premium revenue per box? What is the balance in unearned revenue at the end of December 2021? What will be recorded as gross profit in the fiscal year ended 2021 relating to the promo pizzas? (2) Assume PP is a private company using ASPE. What is the balance in estimated liability for premiums at the end of December 2021? What will be recorded as gross profit in the fiscal year ended 2021 relating to the promo pizzas?

Answer rating: 100% (QA)

1 IF RS Premium Revenue per Box 45 000 36 000 15 000 3 00 Un earned Revenue ... View the full answer