QUESTION ONE $[25]$

Verruca Limited, a convenience franchise attached to Go Fuel Filling Stations, has recently launched a customer loyalty programme that rewards a customer with one customer loyalty point for every R$30$ of purchases. The loyalty programme is optional ie customers need to register to join it and it is free to join. However, not all customers choose to take advantage of the programme.

Each point is redeemable for a R$3$ in value for purchases of Verruca Limited products.

During a reporting period, customers who took part in the loyalty programme purchased products for R$450000,$ thus earning the promised number of points.

Verruca Limited expects $95\%$ of the points to be redeemed. The entity estimates a stand$-$alone selling price of R$3$ per point.

Required:

$1.$

Briefly explain how Verruca Limited should account for the customer loyalty programme with respect to the performance obligations and allocation of the transaction price

Your answer should include:

$-$

Identifying the performance obligations $(4)$

$-$

Allocation of the transaction price $(12)$

$-$

When the performance obligation will be satisfied $(2)$

$2.$

Prepare the required journal entry on the date of the sale of goods $(7)$