Reference no: EM132703232

To increase sales, Pronghorn Inc., a public company following IFRS, implemented a customer loyalty program that rewards a customer with one loyalty point for every $40 of merchandise purchased. Each point is redeemable for a $2 discount on any purchases of Pronghorn merchandise in the next three years. After the program launched, during 2020, customers bought merchandise for $420,000 (all products are sold to provide a 35% gross profit) and earned 10,500 points redeemable for future purchases. The stand-alone selling price of the merchandise sold is $420,000. Based on prior experience with incentive programs like this, Pronghorn expects 7,900 points to be redeemed related to these sales.

Problem 1: Prepare the journal entries for cash sales including the issuance of loyalty points for Pronghorn in 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round percentage allocations to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 5,275.)

i) To record cash sales of products subject to loyalty points
ii) To record cost of goods sold