CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS
MAY 2024 CPALE BATCH 95
COUPON OFFER AND CUSTOMER LOYALTY PROGRAM
1. An entity is a manufacturer of car shampoo and sells its product to local retailers. Retailers sell the product
to its customers and for each product purchased by the customers, a coupon of P100 discount is given
and may be used on future purchase of the same product. Retailers are reimbursed for the discount by the
manufacturer when customers redeem their coupons. During the current year, the manufacturer sold 8,000
products to the retailers at P550 each product or P4,400,000. It is expected that 75% of the coupons will
be redeemed. At year-end, the manufacturer paid the retailer P250,000 as reimbursement.
I. The stand-alone selling price of the rebate coupon is equal to the discount on the products sold
during the year adjusted by the expected redemption.
II. The sales revenue should be recorded at P4,400,000 for current year
III. The rebate liability should be reported at P278,000 at the end of year.
a. All statements are true
b. All statements are not true
c. Only Statements I and II are true
d. Only statements I and III are true
2. An entity is offering a promotion wherein if a customer buys 3 pieces in a single transaction, a customer
receives a coupon for one additional piece for free. During 2024, the entity sold 30,000 pieces at P200
each. It is expected that 75% of the coupons will be redeemed. During 2025, the entity delivered 6,000
free additional pieces.
I. The stand-alone selling price of the coupons is equal to the selling price of the free product adjusted
by the expected redemption.
II. The sales revenue should be recorded at P4,800,000 for 2024
III. The deferred revenue from coupons should be reported at P480,000 on December 31, 2025.
a. All statements are true
b. Only statement I is true
c. Only statements II and II are true
d. All statements are not true
3. An entity is a retailer that sells clothing. The entity has launched a promotional campaign wherein
customers who buy clothing with a single purchase of at least P4,000 shall be granted “30% discount
coupons” on future purchases.
During the campaign, the entity sold clothing worth P5,400,000 and issued simultaneously 500 “30%
discount coupons” to the customers. It is expected that 80% of the coupons will be redeemed and the
customers using the discount coupons will spend an average price of P5,000.
I. The stand-alone selling price of the discount coupons is equal to the amount of discount on future
purchases adjusted by the expected redemption.
II. The sales revenue should be initially recorded at P5,400,000
III. The sales revenue should be recorded at P1,940,000 from the redemption of the discount coupons.
a. All statements are true
b. All statements are not true
c. Only statements I and II are true.
d. Only statements I and III are true
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4. An entity sold gift certificates worth P8,000,000 to customers in exchange for future delivery of its
product. The certificates are nonrefundable and the entity expected that 15% of the certificates will not
be redeemed. During the year, the entity redeemed gifts certificates worth P5,100,000.
Expected value of breakage (8,000,000 x 15%) 1,200,000
Expected value of certificates to be redeemed (8,000,000 x 85%) 6,800,000
I. The amount of breakage is the value of the gift certificates expected not to be redeemed.
II. The breakage revenue is equal to the proportion of value of certificates redeemed to the expected
value of certificates to be redeemed multiplied by the expected value of breakage.
III. The breakage revenue should be reported at P900,000 for current year.
IV. The deferred revenue from gift certificates should be reported at P2,900,000 at the end of year.
a. All statements are true
b. All statements are false
c. Only statements I, II and III are true
d. Only statement IV is true
5. An entity, a grocery retailer, operates a customer loyalty program. The entity grants program members
loyalty points when they spend a specified amount on groceries. Program members can redeem the points
for further groceries. The points have no expiry date.
During 2024, the sales amounted to P6,800,000 based on stand-alone selling price. During the year, the
entity granted 60,000 points. But management expected that 100% of these points will be redeemed.
The stand-alone selling price of each loyalty point is estimated at P20.
On December 31, 2024, 28,800 points have been redeemed. In 2025, management revised its
expectations and now expected that 90% points will be redeemed altogether. During 2025, the entity
redeemed 9,000 points.
I. The transaction price should be allocated between product sales and award points based on stand
alone selling price.
II. The sales revenue should be reported at P6,800,000 for 2024.
III. The revenue earned from loyalty points should be reported at P714,000 for 2025.
a. All statements are true
b. All statements are false
c. Only one statement is true
d. Only two statements are true
End
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