Exercise 11

Exercise 11.
1 – Coupon
A retailer sells vacuum cleaners to customers at $100,000 and provides a
coupon for 60% discount off their next purchase.The coupon expires 3
months after the purchase date. The retailer estimates that 80% of the
customers will exercise the option for the purchase of, on average, $30,000
of discounted additional products.
Required: Prepare journal entry at the date of sale of the vacuum cleaner.
DR Cash 100,000
CR Revenue 100,000
DR Cash 14,400 ( 30,000 x 80% x 60%)
CR Revenue 14,400
Step 1: Identify the contracts
Contract to sell vacuum cleaners to customer
Step 2: Identify Performance Obligations (POs)
Sell vacuum cleaners and provides coupon
Step 3: Determine the transaction price (TP)
TP = 100k (Per question)
Step 4: Allocate TP to POs
(bán cho khách hàng là số lớn)
POs SASP % Allocation
100,000 87.41% 87,410
Sell vacuum cleaner
14,400 12.59% 12,590

Provides coupon
(30,000*60%*80%)
114,400 100% 100,000

Total
Step 5: Recognize revenue

DR Cash 100,000
CR Revenue 87,410
CR Contract Liability 12,590
Exercise 11.2 – Free product rebate

Phi Thanh Van Cosmetics Co. sells skin care products to customers at
$2,000 per set. If customers buy 3 sets at a time and fill in an on-line
application form within 1 week after purchase, she would become VIP and
be given a welcome gift that worth of $200 sales value after successful
registration. The vendor estimates , based on recent experience, that 80%
of the customers will complete the on-line registration and receive the free
gift..
Required: Prepare journal entry at the date of sale of a skin care set.
Contract to sell skin care products to customer
Sell skin care products and provides a gift
TP = 6,000
6,000 97.4% 5,844

Sell skin care products
160 2.6% 156

Provides gift
(200*80%)
6,160 100% 6,000

Total

DR Cash
6,000
CR Revenue 5,844
CR Contract Liability 156
Exercise 11.3 - Coupon on print advertisement

Manufacturer sells 1,000 boxes of chocolate to supermarkets chain at
$10 each. Supermarkets sell at $15 to customers. The manufacturer
issues coupons in newspapers and magazines to allow customers $2
dollar reduction in price by presenting the coupon within 3 months after
issue. The manufacturer would compensate supermarkets for loss of $2
revenue. The manufacturer estimates 400 coupons would be redeemed.
Required:
How should the manufacturer account for this contract when chocolate
is transferred to the supermarkets?
Contract to sell boxes of chocolate to supermarkets.
Provide boxes of chocolate.
(Giải thích thêm, việc cung cấp mã giảm giá ko phải là nghĩa vụ thứ 2, vì ko có
distinct, nên bài này có 1 nghĩa vụ giống bài 4 thôi)
TP = $10 x 1,000 units - 400 coupon x $2 = $9,200
Dr Cash $10,000
Cr Revenue $9,200
[($10 x 1000 units) - (400 coupons x $2)]
Cr Contract liabilities $800
= 400 coupons x $2
Exercise 11.4 – Re-estimate variable consideration

An FMCG entity sold shampoo to a customer for $10 per unit on 2 Jan
20x6. If the customer buys 1,000 units in a calendar year, the price per
unit is retrospectively reduced to $9. In the 1st quarter, the customer
bought 75 units only. The entity estimated the customer cannot exceed
the 1,000-unit threshold. The customer was then acquired by a listed
company and become part of a bigger group. On 1 Jun 20x6, the
customer bought 500 units. The entity now estimated the customer
would exceed the 1,000-unit threshold.
Required:
How should this transaction be accounted for?
Contract to sell shampoo to customers.
Provide shampoo.
TP = $10 each units
Step 4: Allocate TP to POs (Do bài này có 1 nghĩa vụ, nên bước này khỏi làm là
đúng rồi)
● In the 1st quarter, it was highly probable that a significant reversal in the
cumulative amount of revenue recognised ($10 per shampoo) would not
occur when the uncertainty was resolved, that is when the total amount
of purchases was known.
→ Therefore, the entity should recognise revenue of $750 (75 units x $10), for the 1st
quarter ended 31 May 20X6
Journal entries:
Dr Cash $750
Cr Revenue $750
● In the 2nd quarter, it would be reasonable to conclude that FMCG’s

purchases would exceed the threshold for the volumn discount in the
year to 31 December 20X6, and therefore that it was appropriate to
retrospectively reduce the price to $9 per shampoo. By contrast,
revenue will be adjusted in quarter 2 (not retrospectively adjust in
quarter 1).
→ New TP = $9 each unit
→ The entity should record revenue $4,425 that comes form:
Revenue of additional 500 shampoos = $4,500 (500 units x $9)
Less the change in transaction price for the reduction of the price of the
shampoos sold in the quarter ended 31 December 20X6 = $75 [75 units x
($10 - $9)]
Dr Cash $4,500
Cr Revenue $4,425
Cr Contract $75
liability
Exercise 11.5
A supermarket chain has a customer loyalty program which granted 1
loyalty point for every $10 purchase. Each point is redeemable for $1
discount on future purchase. During period 1 customers purchased
$100,000 and earned 10,000 points Supermarket estimated 95% would be
redeemed for products in future.
By period 1 , 4,500 points have been redeemed.
In period 2, another 4,000 points redeemed. Cumulatively there is 8,500
points redeemed. Now supermarket estimated total redemption 9,700
points would be redeemed
Required: How should this transaction be accounted for in period 1 and
period 2?
Contract to sell products and grant loyalty points to customer.
The supermarket chain have to:
- Sell product to customers.
- Grant 1 loyalty point to customer for every $10 purchase. Each point is
redeemable for $1 discount on future purchase.
TP of products: 100,000
TP tổng hợp đồng = 100,000 (không biến đổi về sau → k thay đổi tổng cũ)
PO1 phân bổ cho hàng đã bán 91,324; PO2 = 8676 (95%) --> 47%=
4,500/95,000
PO1 Earned; PO2 = 8676 (97%) → 80% = 8,500/97,000
Most likely TP of points: 10,000*95% = 9500
100,000 91,324% 91,324

Sell product
9,500 8,676% 8,676

Grant points
109,500 100% 100,000

Total

In period 1:
DR Cash 100,000
CR Revenue 91,324
CR Contract liability 8,676
DR contract liability 4,110

CR revenue 4,110 [= (4,500 points ÷ 9,500 points) × 8,676]
In period 2:
DR contract liability 3,493
CR revenue 3,493 = [(8,500 ÷ 9,700) × 8,676] – $4,110
The contract liability balance is 1,073 (8,676 initial allocation – 7,603 of
cumulative revenue recognized)
Exercise 11.6 – Gift card

A customer buys $100 gift card from a coffee chain store. Valid up to
one year from the date of purchase. Coffee chain store estimates
customers would redeem $90 of the gift card and $10 will expire unused
(10% breakage). Coffee chain store has no obligation to remit unused
fund or any unused gift cards. In the period, $50 of the gift card has been
redeemed. Required: How should the gift card be accounted for?
Contract to sell gift card to customer
Provide gift card
TP = $100
$100 gift card would redeem $90 of the goods. Hence, for every $1 of gift card
redemptions, the revenue is recognised is $100/90 = $1.11
When the gift cash is sold
DR Cash 100
CR Contract Liability 100
When the gift cash is redeemed

DR Contract Liability 55.5 (=50*1.11)
CR Revenue 55.5
Exercise 11.7
Cell phone manufacturers sells 300 new model of handsets to a retail
chain store at $100 each. Cost of manufacturing is $60 each.
Manufacturer allows the retail chain to return any unsold products in 6
months with full refund. Manufacturer uses expected value method and
estimates.
▪ 40% 8 mobiles return
▪ 45% 9 mobiles return
▪ 15% 18 mobiles
Cost of recovering the returned handsets is $80. The unsold handsets,
would then be exported and sold to second-tier markets, at a discounted
price of $20 each. (at a loss of $40 each) Required: Accounting for above
information (For the manufacturer)
Bài làm đúng rồi, mà trình bày ko theo yêu cầu, khó hiểu.
Contract to sell mobiles to retail chain store
Provide 300 new model of handsets
No of mobiles Possibility Expected value

return
8 40% 3.2
9 45% 4.05
18 15% 2.7
Total 9.95
Hence, the TP = Total value of handsets sold - Expected value return

= 300*100 - 9.95*100 = 29005
When the mobles is sold
DR Cash 30,000 =300*100
CR Revenue 29,005 =TP
CR Liability on refund 995 (Balance)
And recognize Cogs

DR Cogs 17,403 (Balance)
DR Asset on refund 597 =60*9.95
CR inventory 18,000 =60*300
The number of return mobiles (9.95) has the NRV = Selling price - Cost to sell =
9.95*20 - 80 = 119 while their historical cost is 60*9.95 = 597. Hence, they are
impaired 478 (=597-119). We should record the following entries:
DR Cogs 478
CR Provision for impairment 478
of inventory - TK 2294

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Exercise 11.

14,400 12.59% 12,590

114,400 100% 100,000

Step 5: Recognize revenue

CR Contract Liability 12,590

Exercise 11.2 – Free product rebate

6,000 97.4% 5,844

160 2.6% 156

6,160 100% 6,000

Step 5: Recognize revenue

Exercise 11.3 - Coupon on print advertisement

Exercise 11.4 – Re-estimate variable consideration

● In the 2nd quarter, it would be reasonable to conclude that FMCG’s

POs SASP % Allocation

100,000 91,324% 91,324

9,500 8,676% 8,676

109,500 100% 100,000

Step 5: Recognize revenue

DR contract liability 4,110

Exercise 11.6 – Gift card

CR Contract Liability 100

When the gift cash is redeemed

No of mobiles Possibility Expected value

Hence, the TP = Total value of handsets sold - Expected value return

And recognize Cogs

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