P-Dog Inc. has a loyalty points program which awards two customer loyalty points for every $100 of goods purchased. During the year, the company sold $200,000 of goods in the store and awarded 4,000 points which can be redeemed and used towards future purchases. The stand-alone selling price for the goods sold is $150,000. Based on past experience, P-Dog expects that only 80% of the points will actually be redeemed. The stand-alone selling price of the points is $1.50 per point. Based on the information provided, the amount of revenue that P-Dog will report on its statement of comprehensive income for the year would be:
A) $200,000.
B) $150,000.
C) $154,800.
D) $193,798.

Question

Quizplus · Accepted Answer

The revenue recognized from the sale of goods is the stand-alone selling price of the goods sold, which is $150,000.

The revenue recognized from the loyalty points program is based on the expected redemption rate, which is 80% of the loyalty points issued. This means that 3,200 points (80% of 4,000) are expected to be redeemed. The revenue recognized from these points is the stand-alone selling price of the points multiplied by the expected redemption rate, which is:

$1.50 × 3,200 = $4,800

Therefore, the total revenue recognized by P-Dog is:

$150,000 + $4,800 = $154,800

Thus, the correct answer is D, $193,798.

P-Dog Inc Has a Loyalty Points Program Which Awards Two Customer