Prepare the journal entry for the loyalty program


Problem

A boutique spa provides a variety of services to customers. As a way to retain customers, the spa provides a loyalty program in which customers earn a $10 future service credit for every $200 spent during the period. During the month of April, the spa earned $12,000 of revenue. It predicts that 70% of the credits will be redeemed towards future purchases.

Task

A. Prepare the journal entry for the loyalty program assuming that the company records the program as unearned revenue at the time of sale.

B. Prepare the journal entry for the program assuming that the company's policy is to record the program as an accrued cost.

C. Explain how the company might use data analytics to better understand the success of their loyalty program.

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Financial Accounting: Prepare the journal entry for the loyalty program
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