Points redeemable for future purchases

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Reference no: EM13963518

Martz Inc. has a customer loyalty program that rewards a customer with 1 customer loyalty point for every $10 of purchases. Each point is redeemable for a $3 discount on any future purchases. On July 2, 2014, customers purchase products for $302,000 (with a cost of $167,000) and earn 30,200 points redeemable for future purchases. Martz expects 26,700 points to be redeemed (based on its past experience, which is predictive of the amount of consideration to which it will be entitled). Martz estimates a standalone selling price of $2.80 per point (or $84,560 total) on the basis of the likelihood of redemption. The points provide a material right to customers that they would not receive without entering into a contract. As a result, Martz concludes that the points are a separate performance obligation.

At the end of the first reporting period (July 31, 2014), 10,000 loyalty points are redeemed. Martz continues to expect 26,700 loyalty points to be redeemed in total. Determine the amount of loyalty point revenue to be recognized at July 31, 2014

Reference no: EM13963518

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