Super Electronics initiated Super Rewards Program in fiscal 2008


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Super Electronics initiated Super Rewards Program in fiscal 2008 to compete with other retailers. For an annual membership fee of $24, customers enrolled in the program receive announcements of special sales, product coupons, and invitations to shipping events. The annual membership fee comes with a “complete satisfaction” guarantee. If customer is not satisfied with SRP program for any reason, the company is obliged to refund the fees for the unused period of membership. SRP members earn two points for each qualifying purchase of $1 of products and services of the company. SE issues a $5 certificate for every 100 points earned by a member. The certificate expires one year after issuance. SRP members made qualifying purchases totaling $330 million during 2008. With no historical experience with point redemption, the company recorded the entire retail value ($33 million) of certificates issues as the reduction in sales and an increases in accrued liabilities. Customers spent $23 million of the certificates in fiscal 2008, and $5 million of certificates expires before the end of the fiscal year. When certified expired, the company recorded as a sale and a decrease in accrued liabilities. The Company sold 25,000 SRP memberships per month in fiscal year 2008, resulting in proceeds of $7,200,000(2,500,000*12months*$24) in net sales. Questions: 1. How should the company account for its membership fees? Point-in-time or over-time? Provide citation from ASC 606 to support your answer. 2. If the membership is non-refundable, would you change your answer? Provide citations from ASC 606. 3. How should the company account for the points issued, redeemed, and expires under the program? Provide from ASC 606. Provide journal entries. HighnessSwanMaster168
posted a question ยท Nov 09, 2015 at 4:22am

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