Van Department Store - NAGYUBH PDF

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Summary

Van Department Store grants loyalty awards to its customers. For every P500 purchase made bythe customer, the customer receives a credit of 10 points equivalent to P10. Theaccumulated points may be used by the customer as part or full payment for merchandisepurchased in the future.During the year 20...

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VanDepar t mentSt or egr ant sl oy al t yawar dst oi t scust omer s .Forev er yP500pur chasemadeby t he cust omer ,t hecust omerr ecei v esacr edi tof10poi nt sequi val entt oP10.The accumul at edpoi nt smaybe usedbyt hecust omeraspar torf ul lpaymentf ormer chandi se pur chasedi nt hef ut ur e. Dur i ngt hey ear2014,t hecompanymades al esaggr egat i ngP5,000, 000onwhi ch100, 000 poi nt swer e awar dedt ocust omer s .Oft heP5,000, 000,2% i sconsi der edt obeal l ocabl et o t hecust omerl oy al t y awar ds.Dur i ngt hesamey ear ,25, 000poi nt swer er edeemed,andat December31,2014,i ti sexpect ed t hatat ot alof90, 000poi nt swoul dber edeemedr el at i ng t o2014sal es . Dur i ng2015,anaddi t i onal35, 000poi nt sawar dedi n2014wer er edeemedandVan Depar t mentSt or e r evi sedi t ses t i mat eoft ot alr edempt i onf orpoi nt sgr ant edi n2014at 95, 000poi nt s. REQUI RED: ( a) Det er mi net heamountofr ev enuer ecogni z edasar es ul tofr edempt i onofr ewar dpoi nt si n y ear s2014. ( b) Det er mi net heamountofr ev enuer ecogni z edasar esul tofr edempt i onofr ewar dpoi nt si n y ear s2015. ( c) Det er mi net heamountofl i abi l i t yt obepr esent edi nt hest at ementoffinanc i alposi t i on r el at i ngt o c ust omerl oy al t yawar dsatDecember31,2014. ( d) Det er mi net heamountofl i abi l i t yt obepr esent edi nt hes t at ementoffinanci alposi t i on r el at i ngt o c ust omerl oy al t yawar dsatDecember31,2015.

Total customer loyalty program = 2% of Sales = 2% * P5,000,000 = P100,000 Value of 1 point = 10 points / P10 = P1 Part a : Total points provided to customers = 100,00 points Total value of points provided in the year 2014 = 100,000 points * P1 per point = P100,000 Total points redeemed = 25,000 points Expected points to be redeemed = 90,000 points Remaining expected expired points = Total points - Total expected points to be redeemed = 100,000 points - 90,000 points = 10,000 points Total revenue from the reward point for the company = 10,000 points * P1 per point = P10,000 In accordance with the guidelines issued by GAAP, those companies which are providing rewards to the customers, need to record the revenue from the redemption of reward points as the deferred revenue till the period they are actually received by the company. Since, at the end of December, 2014 it was expected that the company would redeem 90,000 points, the remaining 10,000 points are still on hold to be received by the company as revenue.

Therefore, the company would recognized P10,000 as deferred revenue for the period 2014. Part b : Now, in the year 2015, the company paid the additional 35,000 points of the year 2014 in this year because of which the company revised its expected redemption point to 95,000. This revision of redemption points would lower down the deferred revenue for the current year as follows : Points revised = 95,000 points Total points still on hold = 100,000 points - 95,000 points = 5,000 points Deferred revenue for 2015 = 5,000 points * P1 per point = P5,000 Therefore, the company would recognized P5,000 as deferred revenue for the period 2015. Part c : For the period 2014, the liability of the company towards the customer loyalty program is calculated as follows : Total loyalty program value = P100,000 Value of points redeemed (2014) = 25,000 points * P1 per point = P25,0000 Liability towards customer loyalty program = P100,000 - P25,000 = P75,000 Therefore, the company would recognized P75,000 as liability towards the customer loyalty program for the period 2014. Part c : For the period 2015, the liability of the company towards the customer loyalty program is calculated as follows : Liability outstanding towards loyalty program = P75,000 Value of points redeemed (2015) = 35,000 points * P1 per point = P35,0000 Liability towards customer loyalty program = P75,000 - P35,000 = P40,000 Therefore, the company would recognized P40,000 as liability towards the customer loyalty program for the period 2015....