Problem 5

The Kettle Black (TKB), a high-end kitchen store, maintains a loyalty program for its

customers. For every purchase, members receive points. In fiscal 2020, the store made

sales of $1 million and awarded 50,000 points. These points do not expire. The

company estimates that approximately 65% of these points will be redeemed by

members and that based on this, the fair value of the points is $50,000. In fiscal 2021,

the store made sales of $1.25 million and awarded 62,500 points, which do not expire,

have an estimated redemption rate of 65% and a fair value of $62,500. Members

redeemed 15,000 points in fiscal 2021.

Provide the necessary journal entries for fiscal 2020 and 2021.