Reference no: EM132578887

Van Department Store grants loyalty awards to its customers. For every P500 purchase made by the customer, the customer receives a credit of 10 points equivalent to P10. The accumulated points may be used by the customer as part or full payment for merchandise purchased in the future.

During the year 2014, the company made sales aggregating P5, 000,000 on which 100,000 points were awarded to customers. Of the P5, 000,000, 2% is considered to be allocable to the customer loyalty awards. During the same year, 25,000 points were redeemed, and at December 31, 2014, it is expected that a total of 90,000 points would be redeemed relating to 2014 sales.

During 2015, an additional 35,000 points awarded in 2014 were redeemed and Van Department Store revised its estimate of total redemption for points granted in 2014 at 95,000 points.

REQUIRED:

Question (a) Determine the amount of revenue recognized as a result of redemption of reward points in years 2014.

Question (b) Determine the amount of revenue recognized as a result of redemption of reward points in years 2015.

Question (c) Determine the amount of liability to be presented in the statement of financial position relating to customer loyalty awards at December 31, 2014.

Question (d) Determine the amount of liability to be presented in the statement of financial position relating to customer loyalty awards at December 31, 2015.