Martz Inc. has a customer loyalty program that rewards a customer with 1 custome

Question

Martz Inc. has a customer loyalty program that rewards a customer with 1 customer loyalty point for every $10 of purchases. Each point is redeemable for a $3 discount on any future purchases. On July 2, 2014, customers purchase products for $308,000 (with a cost of $176,000) and earn 30,800 points redeemable for future purchases. Martz expects 25,000 points to be redeemed (based on its past experience, which is predictive of the amount of consideration to which it will be entitled). Martz estimates a standalone selling price of $2.5 per point (or $77,000 total) on the basis of the likelihood of redemption. The points provide a material right to customers that they would not receive without entering into a contract. As a result, Martz concludes that the points are a separate performance obligation. Determine the transaction price for the product and the customer loyalty points.

Explanation / Answer

standalone selling price percentage allocated transaction price amount allocated product purchae 308000 90.91 308000 280002.8 loyalty points 30800 9.09 308000 27997.2 338800 100 308000

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