Unredeemed coupons
During 2020, Red Deer Corp. sold 200,000 tickets for hockey games for $ 60 each under a new sales promotion program. Each ticket contains one coupon. Any person who presents 2 coupons can receive a ticket to an Edmonton Flames football game for only $ 2. Red Deer pays $ 8.00 per football ticket and at the beginning of 2020 had purchased 80,000 tickets (any tickets not used in 2020 can be used in 2021). The company estimates that 60% of the coupons will be redeemed even though only 50,000 coupons had been processed during 2020.
Instructions
a) What amount should Red Deer report as a liability for unredeemed coupons on December 31, 2020?
b) What amount of expense will Red Deer report on its 2020 income statement as a result of the promotional program?
c) Prepare any necessary 2020 journal entries related to the promotion program.
d) Explain how the accounting treatment for this promotion is treated under IFRS.

Question

Quizplus · Accepted Answer

The Answer of Unredeemed coupons
During 2020, Red Deer Corp. sold 200,000 tickets for hockey games for $ 60 each under a new sales promotion program. Each ticket contains one coupon. Any person who presents 2 coupons can receive a ticket to an Edmonton Flames football game for only $ 2. Red Deer pays $ 8.00 per football ticket and at the beginning of 2020 had purchased 80,000 tickets (any tickets not used in 2020 can be used in 2021). The company estimates that 60% of the coupons will be redeemed even though only 50,000 coupons had been processed during 2020.
Instructions
a) What amount should Red Deer report as a liability for unredeemed coupons on December 31, 2020?
b) What amount of expense will Red Deer report on its 2020 income statement as a result of the promotional program?
c) Prepare any necessary 2020 journal entries related to the promotion program.
d) Explain how the accounting treatment for this promotion is treated under IFRS.

Unredeemed Coupons During 2020, Red Deer Corp. Sold 200,000 Tickets for Hockey