Reference no: EM132950226

Question - LOYAL Corp. operates a customer loyalty programme. For every P100 worth of purchases, a customer receives 5 loyalty points. These points can be spent on purchases from LOYAL Corp. and each point equals P1 worth of purchases.

During year 2021, LOYAL Corp. had product sales for P100 million. By the end of the year, 45% of the points have been redeemed and LOYAL Corp. estimates that 90% of points will be redeemed by customers.

During year 2022, LOYAL Corp. had product sales for P120 million and 50% of the points earned in 2022 were redeemed by the customers. Meanwhile, 1.5 million points earned in 2021 were redeemed by customers in 2022. As of the end of 2022, LOYAL Corp. now believes that 95% of points earned in 2021 will be redeemed while it expects that 90% of points earned in 2022 will be redeemed by customers.

This problem has two questions:

Determine the liability on customer loyalty program on December 31, 2021.

Determine the total revenue for the year ended December 31, 2022.