Calculate the transaction price to be allocated

Assignment Help Accounting Basics

Reference no: EM132717536

Question - In 2018, Allfuels Limited introduced a loyalty programme for their customers. Every customer is rewarded one point for every R10 worth of purchases (irrespective of the type of purchase). Customers can redeem these points in the future for a R1 discount for every point on future purchases either in the convenience shop or for fuel purchases. During March 2019, customer purchases (both fuel and the convenience store) totalled R1 000 000 and earned 100 000 in points.

The consideration is fixed and the stand-alone selling price of purchased books is R1 000 000.

Past history indicates that 95 000 points will be redeemed. AllFuels Limited has estimated a stand-alone selling price of R0,95 per on the basis that 95 000 points will be redeemed.

Required -

1. Calculate the transaction price to be allocated to the performance obligations of AllFuels Limited and prepare the journal entry to record the March 2020 sales.

2. Calculate and prepare the journal for revenue in respect of loyalty points to be recognised in March assuming the following:

- At the end of March 2019, 50 000 points have been redeemed and AllFuels Limited still expects 95 000 points to be redeemed.

3. Calculate and prepare the journal for revenue in respect of loyalty points to be recognised in March 2020 assuming the following:

- At the end of March 2020, a further 20 000 points have been redeemed and AllFuels Limited now expects 97 000 points to be redeemed.

Reference no: EM132717536

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