,ry44K,

PNEMIUMS
hemiwmsare articles of value such as toys, dishes, silverware
and other goods given to customers as result of past sales or
lales promotion activities. ;i_.,., , .l:... ...
In order to stimulate the sale of their products, entities offer
premiums to custorners in return for product labels, box tops,
wrappers and coupons.
CHAPTER 2 Accordingly, when the merchandise in sold, an accounting
liability for the future distribution of the premium arises
and should be given accounting recognition.
PREMIUM LIABILITY
The accounting procedures for the acquisition of premiums and
recognition of the premium liability are as follows:

1- When the premiums are purchased:

Premiums xx
TECHNICAL KNOWLEDGE Cash xx

2. When the premiums are distributed to customers:

To know the recognition of a premium lig,bility. Premium expense xx

. Premiums . xx
To lznow the recognition, of a cash rebate progpom. 3. At the end of the year, if premiums are still outstanding:

Premium expense xx
To lznou; the recotgnition of a cash d,iscount offer Estimated premium liability xx
progranx lp'. -:,.
'l
''
To und,erstand, the recognition and, measurement
of a customei loyalty progratn.

42 43
Illustration Computation
An entity manufactures a certain product and sells it at PB00 Wrappers to be redeemed (60% x 10,000 wrappers) , 6,000
per unit. l,ess: Wrappers redeemed 4,000

A soup bowl is offered to customers on the return of b wrappers

Balance
i{gq
plus a remittance of P10. Premiums to be distribqted (2,000 / 5) 400

The bowl costs P50, and itis estimated that 60% of the wrappers Estipated liabilrW (a00 x 40) 19,000
willbe redeemed.
Financial statdment classifi cation
The data for the first year concerning the premium plan are
summarized below. At the end of the year, the accounts related to the premium
plan are classified as fpllows:
Sales, 10,000 units at P300 each 3,000,000
Soup bowls purchased, 2,000 units at P50 each 100,000 Current asset:
Wrappers redeemed t
4,000 Premiums_ sgup bowls 60,000

The entries that would.be made in the first year to record the Current liability:
Estimated premium liability 16,000
sales, premium putchases and redemption, and year.iend
adjustment are:
48,000
1. To record the sales:
Cash 3,000,000
Sales 3,000,000

2. To record the purchase of the premiums:

Premiums soup bowls

Cash-
100,000
100,000
.
3. To record the red.emption of 4,000 wrappers:
Cash (800 x 10) 8,000
Premium expense (800 x 40) 32,000
Premiums - soup bowls (S00 x 50) 40,000
(4,000 wrappers / 5 = 800 bowls distributed)

4. Tcj record the liability for the premiums at the end of the
frrst year:
Premium expense 16,000
E stimated premium liability 16,000

44
()ash rcbatc program Cash discount coupon
A variation of a premium offer is a cash rebate program which
has become common place. Another variation of the premium offer is the cash discount
coupon program.
Cash register receipts, bar codes, rebate coupons and other
proof of purchase often can be mailed to the manufacturer The cash d.iscount coupon program is a popular marketing
for cash rebate. tool for the purpose of stimulating sales'
Like any premium offer, thg purpose of the cash rebaie
program is to stimulate sales. Like a premium offer and cash rebate program, an expense
and aL estimated" liability for the expected cash discount
Accordingly, the estimated amount of thq cash rebate should should. be recognized in the period of sale'
be recognized both as an expens/' and an estimated liability
in the period of sale. Illustration
Illustration During the current year, an entity inserted in each package
An entity offered P500 cash rebate on a particular model of sold a" coupon offering P300 off the purchase price of a
TV set. The customers must present a rebate coupon particular trand of prod-uct when the coupon is presented
enclosed in every package sold plus the official receipt. to retailers.

Past experience indicates that 40o/o of the coupons will be The retailers are reimbursed for the face amount of coupons
redeemed. plus 10% for handling. Previous experience indicates that
3O% of coupons will be redeemed'
During the current year, the entity sold 4,000 TV sets and
total payments to customers amounted to P450,000. During the current Year, the entitY issued coupons with face
l. To recognize the cash rebate program:
amount of P5,000,000 and total payments to retailers
amounted to P1, 100,000.
Rebateexpense 800,000
1. To recognize the cash discount coupon offer:
Estimated rebate liability 800,000
Cash discount couPon expense 1,650,000
Rebate coupons issued 4,000 Estimated coupon liabilitY 1,650,000
Expected to be redeemed 40%

Coupon rebates to be redeemed 1,600 Face amount of coupons to be redeemed

(30% x 5,000,000) 1,650,000
Cash rebate per coupon 500
Il0o/o
Muitiply by (100% face plus 10% handling)
Estimated rebate liability 800,000
1,650,000
, Total coupon liabilitY
To record the payments to customers:
2. To record PaYments to retailers:
Estimated rebate liabiiity 450,000 Estimated couPon liabilitY 1,100,000
Cash 450,000 Cash 1,100,000

46 41

!&
"f
(lustornt:r loyalt.y program IFRS lb Measurement
-
Many entities use a customer lcyalby program to build brand An cnt,ity shall account for the a.vard credits as a "separately
loyalty, retain their valuable (:ornponent of the initial sale transaction".
increase sales volrrrne. ",,.to-".. and of course,
The customer loyalty program is genqraliy designed to tn other words, the granting of award. credits is effectively
reward customers for-past purchasei and to"p*ouii" lh"; nccounted for as a "future delivery of goods or services".
with incentives to rnake further purchases.
IFRS 15, paragraph 74, provides that an entity shall allocate
Ifa customer buys goods or services, the entity grants the lhe transaction price to each performance obligation
customer award credits often described as "poilits". identified in a contract on a relative stand-alone seiling price
basis.
The entity can redeem the- "points" by distributing to the
customer free or discounted goods or services. In other words, the fair ualue of the consideration receiued
utith respect to the initial sole shall be ailocated between
A customer loyaity program operates in a variety of ways. the 4ward credits and the saie based on relative starld-alone
selling price.
Customers may be required. to accumulate a specified
minimum number of award credits or "points', before they The stand-alone selling price is the price at which an entity
can be redeemed. rvould sell a promised good or service separately to a
customer.

Recognition
The consideration alLocated to the award credits is initially
recognized as deferred revenue and subseqriently
recognized as revenue when the award credits are redeemed.

The a,nrount of reuenue rgcognized, shall be based, on the

number of o,ward credits that haue been redeem,ed relatiue to
the total nuntber expccted to be redeemed.

The estimated redemption rate is .assessed each period.

Changes in the total number expected to be redeemed do
not affect the total consideration for the award credits.
Instead, the changes in the total number of award credits
expected to be redeemed shall be reflected in the amount of
revenue recognized in the current and future periods.

In other words, the calculation of the revenue to be

recognized in any one period is made on a "cumulative basis"
in order to reflect the changes in estimate.
48 49
 Illustration - IFRS 15
.Iournal entries
An entity, a grocery retailer, ciper6rtes a customer loyalty
program. 'l'hc initial sale in 2020 is recorded as follows:
The entity grants program members loyalty points when they (lash ' 9,000,000
spend a specified amount on groceries. Sales 8,100,000

Program members can redeem the points for further

Unearned revenue - points 900,000

groceries. The points have. no expiry date. Redemption of 4,000 points in 2020
The sales during 2Q20 amounted to P9,000,000 based on Unearned revenue -points 450,000
stand-alone selling price. Sales 450,000

During 2020, the customers earned 10,000 points. Revenue to be recognizedin20?O

(4,000/8,000 x 900,000) 450,000
But management expects that 80% or 8,000 of these points
will be redeemed. Redemption of 4,100 points in 202L
The stand-alone seiling price of each loyalty point is Unearned revenue - points 360,000
estimated at P100. Sales 360,000

On December 31, 2020,4,000 points have been redeemed in Points redeemed tnZO2O 4,000
exchange for groceries. Points redeemed inZO2I 4,100

In 202I, the management revised expectations and now Totalpoints redeemed to December 3l,2OZI qJ0q
expects that 90% or 9,000 points will be redeemed Oumulative revenue on December 31, 2021
altogether. (8,100 / 9,000 x 900,000) 810,000
During 2021, the entity redeemed 4,100 points. In 2022, a Revenue recognized in 2020 (450,000)
further 900 points are redeemed. Revenue to be recognized. in 2021 _q99!9q
Management continues to expect that only 9,000 points will Redemption of 900 points in 2022
ever be redeemed, meaning, no more points will be red'eemed
after 2022. Unearned revenue -points 90,000
SaIes 90,000
Allocation of transaction price Points redeemed in 2020 4,000
Points redeemed in2021 4,100
Product sales 9,000,000 Points redeemed in2022 900
Points - stand-alone selling price (10,000 x 100) 1,000,000
Totalpoints redeemed to December 31,2022 9!99_
Total 10,000,000
Cumulative revenue - Decembe r 31, 2022
Product sales (9,000,000 / 10,000,000 x 9,000,000) 8,100,000 (9,000 / 9,000 x 900,000) 900,000
Points (1,000,000 / 10,000,000 x 9,000,000) 900,000 Cumulative revenue - Decernbe r 3L, 2O2l (810,000)
Total transaction price 9,000,000 Revenue to be recognizedin?O2? 90,000

50
51

t
 ,UF,

Third party operates loyalty program QUESTTONS

An entity, a retailer of electrical good.s, participates in a
customer loyalty program operated by an ai"Iirre.-
1.. What is a premium?
The entity g-rants program members one air travel point for
every P1,000 spent on electrical goods. 2. Explain briefly the accounting for the acquisition of
premiums and recognition of estimated premium
Program members can red.eem the points for travel with the Iiability.
airline subject to availability: The entity pays the airline p60
for each point. 3. Explain a cash rebate program.
During the current 5rear, the entity sold electrical good.s for
consideration totaling P4,b00,000 based on staid-alone 4. Explaln a cash discount offer program.
selling p1ic9
lnd granted b,000 points with stand-alone sellirig
price of P100 per point. 15. What is a customer loyalty program?
Selling price Fraction Allocated
Product sales 4,b00,000 45/SO 4,0b0,000
Points (5,000 x100) b00,000 b/b0 4b0,000
i49g9oo 4,5oo,ooo

Revenue from points tU**

Payment to airline (5,000 x 60) ggggqg)
Net revenue from points lgqOOO
The entity has fulfrlled its obligation by granting the points.

Therefore , ret)enu,e from points is recognized, when the

electrical goods are sold.

To record the initial sale

Cash 4,500,000
Sales 4,050,000
Revenue from points 450,000

To record payment to airline

l,oyatty program expense 300,000

Cash 300,000

52 58
PROBLEMS I'robkrm 2-3 (IAA)
Problem 2-1 (IAA) l'op Oompany sells banana juice. In order to promote the drink,
t,lrc cntity inaugurated in the current year a premium plan
Miracle Company manufacturers a product that is packaged r:ir I led "Drink-N-Win."
and sold. A plate is offered to customers sending in three
wrappers accompanied by a remittance of P10. llor every 10 bottle caps and P5 turned in, customers receive
Data with respect to the premium offer are summarized beiow. irn attractive ball-pen and become eiigible for a grand prize of
l'5,000in cash awarded for every 100 tops turned in.
2020 2021
Sales
'l'he entity estimated that only 25% of bottle caps reaching the
3,600,000 4,200,000
Purchase of premium, P50 per plate 390,000 580,000
hiinds of customers will be presented for redemption.
Numller of plates distributed as premiums 5,000 9,000
Estimated number of plates to be l)uring the current year, the entity sold 400,000 bottles of
distributed in subsequent period 2,000 3,000 tranana juice at P9 each, purchased 10,000 ball point pens for a
Distribution cost P20 per plate total cost of P900,000, and incurred nondeferrable costs of
P30,000 applicable to the premium plan.
Required:
A total of 8,000 pens have been redeemed and thirty grand
Prepare journal entries that would be made in 2020 and202l prizes have been awarded.
to record sales, premiurn purchases and redemptions, and
year-end adjustments.
Required:
Problem 2-2 (IAA)
Prepare journal entries to record the transactions relating
Cascade Company manulactures a special laundry soap. to the premium plan for the current year.
A towel i3 offered as a premium to custorners who send in two Problem 2-4 (IAA)
proof-of-purchase seals from the soap boxes and a remittance
of P20. Distribution cost is P5 per towel.
Sony Company is regional music media reseller. As a
Data for the premium offer are. promotion, it offered P50 cash rebate on specific CDs.
Customers must mail in a proof of purchase seal from the
' 2020 2021 package plus the cash register receipt to receive the rebate.
Soap sales 2,500,000 3,125,000 Experience suggests that 80% of the rebates will be claimed.
Towel purchases, P100 per towel 175,000 200,000
Number of towels distributed as premium 1,000 1,800 Twenty thousand of the CDs were sold in the current year.
Number of towels expected to be Totai rebates to customers in the current year amounted to
distributed in subsequent period 600 800 P500,000.

Required: Required:
1. Prepare journal entries for 2020 and 2021.
2. Statement classification of the account balances pertaining Prepare appropriate journal entries for the current year to
to the premium plan. recognize the cash rebate program.

54 55

#
 ' ?!ws'

Problem 2-6 QFRS) Problem 2-6 (AICPA Adapted)

Erika Company operates a customer loyalty program. The In an effort to increase sales, Mill
Company inaugurated a
entity grants loyalty points for goods purchasld. -
aales promotionai campaign on June 30, 2020-
The loyalty points.can be_used by the customers in exchange
The entity placed a coupon red.eemable for a premium in
for goods pf the entity. The points have no
each package of cereal sold.
".pitJ;;;.
During 2020, the entity issued b0,000 award credits and Each premium cost P20 and five coupons must be presented
expects that 80%o of these award credits shalr be
by a customer to receive a premiurn.
".a"u-"a.
The stand-alone selling price of the award credits granted
The entity estimated that only 6O% of the coupons. issued
is reliably measured at P1,000,000.
will be redeemed.
In 2020, the entity sold goods to customers for a total
For the six months ended December 3I,2020, the follovring
consideration of P7,000,000 based on stand-alone sellipg
price.
information is .available:

The award credits red.eemed and the total award credits

Packagesofcerealsold. 160,000
Premiumspurchased 12'000
expected to be redeemed each year are as follows: Couporrsredeemed 40,000

Redeemed Expectedto be redeemed 1. Wirlt amount should" be reported as premium expense for
2020 15,000 2020?
2021 7,950 ' SOYa
85%
2022 , 2,550 85%
a. 640,000
2023 90% b. 384,000
.turooo c. 240,000
Required d. 160,000
Prepare journal entries from 2020 to 2028.
2. What is the estimated liability for premium ulaims
outstanding on I)ecember 3I,2020?

a. 169,000
b. 224,OOO
c. 288,000
d. 384,000

56 DI
Problem 2-7 (AICPA Adapted) I'robltrm 2-S (AICPA AdaPted)
program' For every
During 2020, Day Company sold 500,000 boxes of cake mix 'l'o1rsv ()ornpany started a promotional
receive a 6asketball' The
I0 lrox tops returned' customers the box tops reaching the
under a new sales promotional program. trrri'""f40% of
",,,ii.r'"-ii*^i.a
rrtnr(et will be redeemed'
Each box contained one coupon, which entitled the customer
to a baking pan upon remittance of P40. 'l'he entity provided the following information:
Units Amount
The entity paid P50 per pan and P5 for handling and shipping. 100.000 30,000,000
Sales ofproduct
llasketball Purchased
r,roo 4,125,000
The entity estimated that 80% of the coupons will be i';i;;6;ilAistributed 4,000
redeemed, even though only 300,000 coupons had been
processed during 2020. Whatistheamountofyear-endestimated.Iiabilityassociated
with this Promotion?
1. What amount should be reported as premium expense
a. 4,125,000
for 2O2O?
b. 1,500,000
c. 3,000,000
a. 6,000,000 d. 4,500,000
b. 7,500,000
c. 4,500,000 Problem 2-9 (AICPA AdaPted)
d. 2,000,000 coupons to promote
Cereal Company frequently dis-tributes maiied 100'000
new products. on'b;;;;;;-i, iozo' p the entitv
2. What amount should be reported as liability for ;; ;;;?;; F a r on"""uJri to*'oi ."'" ar urcha se d an d expecte d
unredeemed coupons on December 31, 2020? b"fo*" the December
12,000 of these
"";;;;;;l;-;""'Ld
31, 202Q exPiration date'
a. 1,000,000
b. 1,500,000 red'emption d'ate for the entity to
It takes 30 d-ays from the the
receirre the coupons from retailers'
c. 3,000,000
d. 5,000,000
Theentityreimbursestheretailersanadd.itionalP5foreach
coupon redeemed'
paid retailers'P250'000
On December 31, 2020,tfre entity had
related to these ;;p;;';;Jitui n'oob coupons on hand that
had not been processed for payment'
Whatamountshouldbereportedasliabilityforcouponson
December 3L,20202
a. 350,000
b. 290,000
c. 250,000
d. 225,000
58 59

""
Problem 2-10 (AICPA Adapted) Problem 2-11 (IAA)
In packages of the products, Curran Company inciuded In December 2020, Miian Company'began including one
coupon in each package of candy that it sold and offering a
coupons that may be presented at retail stores to obtain toy in exchange for P50 and five coupons.
discounts.
The toys cost P80 each. Eventually, 60% of. the coupons will
be redeemed.
Retailers are reimbursed. for the face amount of coupons
redeemed plus 10% of that amount for handling costs. During December, the entity sold 110,000 packages of cand"y
and no coupons were redeemed.
The entity granted requests for coupon redemption by On December 31, 2020, what amount should be reported. as
retailers up to three months after the consumer expiration eetimated liability for coupons?
date. a. 198,000
b. 396,000
The entity estimated that 70% of all coupons issued will c. 528,000
ultia'natel5' be redeemed. d. 660,000

Consumerexpirationdate Problem 2-12 (AICPA Adapted)

December BI,20Z0
Total face amount of coupons issued
Blake Company mails coupons to consumers which may be
600,000 presented at a stated expiration date at retail food stores to
Total payments to retailers as of December 31. 2020 220,000 bbtain discounts on certain Blake products.
1. What amount should be reported as premium expense Retailers are reimbursed for the face value of coupons
for 2O2O? redeemed, plus 10% of coupon face value as compensation
for handling costs.
a. 600,000 The entity honors requests for coupon redemption by
b. 180,000 retailers received up to three months after the consumer
c. 462,000 expiration date. Based on experience, 60% of the coupons
d. 199,000 , issued ultimately are redeemed.
The entity provided the following following information with
2. What amount should be reported as liability for respect to two separate series ofcoupons issued during 2020:
unredeemed coupons on December 81, 2OZO? Series A Series B

a. 308,000 Consumer expiration date June 30,2020 December 3L,2020

Total face value ofcoupons issued 1,000,000 2,000,000
b. 200,000 Total payments to retailers on
c. 242,000 December 3I,2020 605,000 405,000
d.0 What amount should be reported as liability for unredeemed
coupons on December 31, 2O2O?
a. 9?0,000
b. 915,000
c. 795,000
d.0
60 61
Problcm 2-13 (IAA) Problem 2-15 (IAA)
CIam Company offers customers a pottery cereal bowl if they ()harlene Company included one coupon in each box of
send in three boxtops from its products and p10.
luundry soap sold.
The entity estimated that 60% of the boxtops will be A towel was offered as a premium to customers who send in
redeemed.
10 coupons and a remittanqe of P10'
During the current year, the entity sold 67b,000 boxes and
customers redeemed 330,000 boxtops receiving 110,000 Distribution cost of premium is P5. Experience indicated that
bowls. The cost of each bowl is P25. only 30% of the coupons will be redeemed'
1. What is the premium expense for the current year? 202A 202L

a. 2,025,000 Boxes of soap sold. 2,000,000 2'500'000

b. 6,075,000 Number of towels purchased at P50 each 50,000 80'000
c. 4,550,000 Coupons redeemed 400,000 700'000
d. 1,650,000
1. What is the premium expense for 2A20?
2. What is the liability for outstanding premiums at
year-end? a. 2,500,000
a. 250,000 b. 2,400,000
b. 375,000 c. 1,800,000
c. 625,000 d. 2,700,000
d. 875,000
2. What is the premium liability on Decernber 31, 2020?
Problem 2-14 (AICPA Adapted)
a. 1,000,000
paJ<er CoTpanV sold consumer products that are packaged b 1,100,000
in boxes- The entity offered an unbreakable glass in exchange c. 800,000
for two box tops and P50 as a promotion during the current d. 900,000
year. The cost of the glass *as P200.
The entity estimated at the end the year that it would be 3. What is the premium expense lor 202t?
probable that 50% of the box tops will be redeemed.
a. 3,000,000
The entity sold 100,000 boxes of the product during the b. 3,750,000
current year and 40,000 box tops were redeemed during the c. 3,375,000
year. d. 4,000,000
What amount should be reported as estimated liability at
year-end? 4. What is the premium liability on Decernber 31, 2027?
a. 3,000,000 a. 1,000,000
b. 1,500,000 b. 1,250,000
c. 750,000 c. 1,125,000
d.0 d. 1,375,000
62 63
 Problem 2-16 (IAA) Problem 2-12 (IAA)
Love company included one coupon in each package of cerc,l During the current year, Deluxe
sold. A towel was offered as a premium to customers who reversible belts under a Company sold 80,000
new ..1""-p"o_otional program.
send in 10 coupons.
Each belt carried one coupon
2420 which entitled the customer
202r to a P50 cash rebate.
Packages ofcereal sold 500,000 800,000 The entity estimaied
Number of towels purchased at P40 per towel 30,000 60,000
that 70% of the coupons w'l be
redeemed, even though only-B!,000
Number of towels distributed ai premium 20,000 50,000 processed during the current coupons had been
Number of towels to be distributed as V"u..
premium next period 5,000 3,000 At year-end' what amount should
be reported as estimated
rebate liability?
1. What is the premium expense for 2020?
a. 1,000,000 a. 1,7b0,000
b. 1,200,000 b. 1,050,000
c. 600,000
c. L,225,00O
d. 500,000
d.0
Problem 2-18 (IAA)
2. What is the premium liability on December 81, ZOZ0?
During the current year, Jolly-company
a. 400,000 rebate coupon to custom"r, *ho offered a p20 cash
b. 200,000 line of products. fur"ha"ed one of its new
c. 600,000
d. 300,000 The entity sold 10,000 these products during the current
year' Bv vear-end..?,600^ofof
the t;;;;. had been claim,ed
7,100 had been paid. and
3. What is the premium.expense fot Z02I?
The historical exnerience ,r'irh
a. 2,400,000 su.ch rebates indicated that
85% of customers claim J,.,;.,;;;":
b. 2,000,000
c. 2,120,000 What amount should be r.ep,:ried
as rebate expcllst: for the
d. 1,920,000 .cunent year?
a. 142,000
4. What is the premium tiabitity on Decenrber 81, ZOZI? b. 152,000
c. 170,000
a. 320,000 d. 200,000
b. 400,000
c. 120,000
d. 520,000

64
65

hhil,**,,,n,,,,,,,,,,,
 \-"
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Problem 2-19 (IFRS)

Problem 2-20 (IFRS)
Jamee Company operates a customerloyalty
program. The
"#itT,n", William Company_operates a customer loyalty
ffjiT
.
flS:'.ldr" ?X n # ""T
Program members,can redeem
rses.
o
"i"iJ *ill"i# program. The
entity grants loyalty points for good.s purchased.
purchases. The points h;";";;;;ilv the-points for further The loyalty-points b:,,r."d.bv
date. :1r, The pointstfe customers in exchange
for goods of the entity. fr""u no expiry date.
ilH:".1 *r"10:,ll:." Hl d 6 0, 0 0 0 p i n t s
j9;,;;ii;:.""i;,,1?,'_iil,f;
: T : : ^.e
a n o
H;lmf "+'":*::::;:r:i 1 9 .

i
During 2020, the entity issued 100,000 award
credits and
rff *,1;$r,:*lr_"r;;;;"il#o;i.J:?:""Jf
is estimated at p20. ilJi#,JL3; expects that 80% of these award credits
,hun ;" ;;iu"-"d.
The sales durins_2020. amounted
to p6,g00,000 based on ; The total stand.-arone se'ing price of
the award
stand-alone seilIng price. "granted is reliably measured..'t pZ,OOOp06. -Y'qtu credits

points have been redeemed

in rn 2020, the bntitv sold goods to customers
""":r?:ffi"f f"t;.?nffi.28'800 for a total
consideration of pg,000,000 based on stand-alone
In 2021, the manaSe.mgnt revised price. selling
expects 90% of the points to expectations and. now i
U"-"uJ"emed.
The award credits redeemed and the totar
In 2021, the entity redeemed award credits
9,000 points. 'expected to be redeemed
"""tt;; are as follows:
1' What amount of the transaction
ro the points? price should be allocated Redeemed Expected to be redeemed
2020 30,000
a. 1,800,000 202L 15,000
80%
b. 1,200,000 90%
c. 1,020,000 1. What is the revenue from points for 2020?
d.0
, What is the revenue earned a. 1,600,000
from loyalty points for 2020? b. 1,500,000
a. 576,000 c. 600,000
b. 489,600 d. 490,000
c. ' 510,000
d.0 2. What is the revenue from point s for 202L?
What is the revenue,earned
from loyalty points for ZOZ1t a. 240,000
a. 244,400 b. 200,000
b, 71d,000 c. 120,000
It l?Qooo d.0
I' 0
Problem 2-21 Multiple choice (IAA)
1. The cost of customer premium offer should be charged
to expense
a. When the related product is soid.
b. When the premum offer expires.
c. Over the life cycle of the product to which the
premium relates..
d. When the premium is claimed.

2. The accounting concept that requires re,cognition of a

liabiiity for customer premium offer is
a. Time period
b. Prudence
c. I{istoricai cost
d. Matching principle
3. Accounting for cost of incentive program for frequent
customer purchases involves
Recording an expense and a liability each period.
-a.
b. Recording a liability and a reduction of revenue each
period.
c. Recording an expense and an asset recluction each
period.
d. Recording an expense and revenue each period.
4. Accounting for cost of incentive program for customer
purchases
a. Requires probability estimation.
b: Follows the matching principle.
c. Is a loss contingency situation.
d. All of these are correct.
5. Providing a monetary rebate program
a. Is accounted for similarly to a premium offer
b. creates an expense for the sellei in the period ofsale.
, c. Creates a liability for the seller at the iime of sale.
d. All of these are correct.

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