Reference no: EM132832688

A department store, operates a customer loyalty program. The entity grants program members loyalty points when they spend a specified amount on purchases. Program members can redeem the points for further purchases. The points have not expiry dates.

• During the year 2020, the customers earned 20,000 points. But management expects that only 70% of these points will be redeemed. The stand-alone selling price of each loyalty point is estimated at P30. The sales during 2020 the year amounted to P3,000,000.
• On December 31, 2020, 8,400 points have been redeemed. In 2021, the management revised expectations and now expects that 90% of these points will be redeemed. During 2021, entity redeemed 6,000.

Required:

Problem 1. What amount of the transaction price should be allocated to product sales? ______________

Problem 2. What amount should be reported as sales revenue including the revenue earned from points for 2020? ______________

Problem 3. How much is the revenue earned from loyalty points for 2021?