Reference no: EM133188195
Question 1 - SM Department Store sells gift certificates, redeemable for store merchandise that expires one year after their issuance. SM has the following information pertaining to its gift certificate sales and redemptions:
Unearned Gift Certificates, beginning - P600,000
Gift Certificates sold during the current year - P2,000,000
Prior year gift certificates redeemed in the current year - P200,000
Gift certificates sold and redeemed in the current year - P1,400,000
SM's pattern indicates that 90% of gift checks sold will be redeemed.
Required - On December 31, 2022, how much should be reported by SM as Unearned Gift Certificates?
Question 2 - Cavite Mall grants its customers one reward point for each P100 sales for the year 2021 only. Each point is redeemable in the form of merchandise and is equivalent to P1. The points accumulate and may be used by the customer as part payment for merchandise purchases in the future. During the year, the total sales amounted to P250,000,000. Fair values of merchandise and the reward points are P247,500,000 and P2,500,000, respectively.
By the end of 2021, 50% of the points granted have been redeemed, and it is expected that only 80% of the points granted will be redeemed by the customers. During 2022, Cavite's total sales amounted to P275,000,000 (excluding the additional redemption of 30%) and it revised its estimate of total points expected to be redeemed at 100%.
Required - How much is the total revenue to be recognized in 2022?
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