Problem
Caffeine Corner Inc. opened for business on January 1, 2022. Caffeine Corner provides a customer reward program through use of a punch card. If the customer buys 6 coffees, their 7" is free. Customers pay $2.45 for a cup of coffee. Caffeine Corner Inc. reports under IFRS and coffee sales are material.
In January, 2,100 cups of coffee were served: 1,900 cups were sold and 200 free cups of coffee have been redeemed so far under the program.
Based on industry data, 75% of all customers will ultimately redeem a free coffee under this type of program. (i.e., Caffeine Corner is expecting further free cups of coffee will be redeemed in future months.)
Task
1. What is the TOTAL revenue recorded by Caffeine Corner for January 2022?
2. What is the liability recorded relating to this program at January 31, 2022?