Big Deal Ltd. is a marketing company having its departmental stores in 'A' class city of India. The company sells diversified products. For the…

Points earned on 1,50,00,000 @ 6 points on every - 400 = [(1,50,00,000/400) x 6] = 2,25,000 points. Out of 2,25,000 points, it is estimated that 54,000 points will remain unredeemed in the current year. Further, it is expected that 75% of the unredeemed points will be redeemed in the future. Accordingly, value of points will be computed as follows: Value of points redeemed in the current year = (2,25,000-54,000) points x 0.6 each point = 1,02,600 Value of points estimated to be redeemed in future = 54,000 points x 75% x 0.6 each point = 24,300 Total value of loyalty points = 1,02,600 +24,300 = 1,26,900 Revenue recognized for sale of goods = 1,48,74,165 [1,50,00,000 x (1,50,00,000 / 1,51,26,900)] Revenue for points = 1,25,835 [1,26,900 x (1,50,00,000 / 1,51,26,900)] Journal Entry for the year 2023-2024 Particulars ₹ Bank A/c Dr. 1,50,00,000 To Sales A/c 1,48,74,165 To Liability under Customer Loyalty programme 1,25,835 (On sale of Goods) Liability under Customer Loyalty programme Dr. 1,01,739 To Sales A/c 1,01,739 (On redemption of (2,25,000 – 54,000) points) Revenue for points to be recognized Undiscounted points estimated to be recognized next year = 54,000 x 75% = 40,500 points Total points to be redeemed within 3 years = [(2,25,000 – 54,000) + 40,500] = 2,11,500 points Revenue to be recognised with respect to discounted points = 1,25,835 x (1,71,000/2,11,500) = 1,01,739 Note: The above answer is based on the consideration that 75% likelihood of redemption of award points in future. Alternatively, the 75% likelihood of redemption of award points in future might not be considered. In such a case, the answer would be as follows: Points earned on 1,50,00,000 @ 6 points on every - 400. = [(1,50,00,000/400) x 6] = 2,25,000 points. Out of 2,25,000 points, it is estimated that 54,000 points will remain unredeemed in the current year. Accordingly, value of points redeemed in the current year = 2,25,000 points x 0.6 each point = 1,35,000 Revenue recognized for sale of goods = 1,48,66,204 [1,50,00,000 x (1,50,00,000 / 1,51,35,000)] Revenue for points = 1,33,796 [1,35,000 x (1,50,00,000 / 1,51,35,000)] Journal Entry for the year 2023-2024 Particulars ₹ Bank A/c Dr. 1,50,00,000 To Sales A/c 1,48,66,204 To Liability under Customer Loyalty programme 1,33,796 (On sale of Goods) Liability under Customer Loyalty programme Dr. 1,08,175 To Sales A/c 1,08,175 (On redemption of (2,25,000 – 54,000) points) Revenue for points to be recognized Undiscounted points estimated to be recognized next year =54,000 x 75% = 40,500 points Total points to be redeemed within 3 years = [(2,25,000 – 54,000) + 40,500] = 2,11,500 points Revenue to be recognised with respect to discounted points = 1,33,796x (1,71,000 / 2,11,500) = 1,08,175