Question

If a company offers a 50$ credit to an existing customer for referring a friend and...

If a company offers a 50$ credit to an existing customer for referring a friend and if the new customer buys something the company will give the existing customer a 50$ credit to their next purchase. How would the company record this - as a reduction of revenue or a marketing expense and when would the comapny record the referral credit and what is the journal entry for it?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The company will record it as a marketing expense because it is directly related to the promotion of company's activities and in any way does not related to reduction of revenue.because such activity does not relates to any ordinary activities incurred in the normal course course of business for earning revenue and which is the basic citeria for recognising revenue.

the company would record the referral credit when the referal process gets completed i.e successful referal has been given by the existing customer to the company.And the credit entry would be-

Profit and loss account

To customer account.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
If a company offers a 50$ credit to an existing customer for referring a friend and...
If a company offers a 50$ credit to an existing customer for referring a friend and if the new customer buys something the company will give the existing customer a 50$ credit to their next purchase. What are the journal enteries the company would record the 50$ referral credit when it is earned by the existing customer? what are the enteries the company would record when the 50$ referral credit is redeemed against a 200$ purchase made by existing customer?
Orange Inc. offers a coupon for 50% off a new watch when a customer buys its...
Orange Inc. offers a coupon for 50% off a new watch when a customer buys its new oPhone. How many performance obligations are represented in this contract? The market price for the oPhone is $600. The watch usually retails for $200, and Orange anticipates 25% of customers will use the coupon to purchase a new watch next month. 1. How many performance obligations are represented in this contract? 2. What is the stand-alone price of the phone? 3. What is...
Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2021, accounts...
Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2021, accounts receivable totaled $690,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $45,000 at the beginning of 2021 and $27,500 in receivables were written off during the year as uncollectible. Also, $2,500 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts...
Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2021, accounts...
Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2021, accounts receivable totaled $720,000. The allowance method is used to account for uncollectible accounts. the allowance for uncollectible accounts had a credit balance of $51,000 at the beginning of 2021 and $30,500 in receivables were written off during the year as uncollectible. also, $3,100 in cash was received in December from a customer whose account previously had been written off. the company estimates bad debts...
True or False 1. A company makes a credit sale for $500. Future collection from the...
True or False 1. A company makes a credit sale for $500. Future collection from the customer is probable. The company will not record revenue from the transaction until it collects cash from the customer. 2. Credit sales involve benefits and costs. A benefit of selling on credit is that the seller makes it more convenient for customers to purchase goods and services. A cost of selling on credit is that there is a delay in collecting cash from customers....
Indigo Company sells televisions at an average price of $990 and also offers to each customer...
Indigo Company sells televisions at an average price of $990 and also offers to each customer a separate 3-year warranty contract for $93 that requires the company to perform periodic services and to replace defective parts. During 2020, the company sold 327 televisions and 227 warranty contracts for cash. It estimates the 3-year warranty costs as $21 for parts and $41 for labor, and accounts for warranties separately. Assume sales occurred on December 31, 2020, and straight-line recognition of warranty...
Eli Company sells novelty items and offers terms of 1/10, n/30 to credit customers. One customer,...
Eli Company sells novelty items and offers terms of 1/10, n/30 to credit customers. One customer, Faulkner, Inc., purchased 100 Sweet-16 party decor packs with a list price of $20 each on March 5, 2013. Refer to the information provided for Eli Company. If the customer pays the amount of the invoice for its purchase on March 14, 2013, how much cash will Eli Company receive?
Stellar Company offers an MP3 download (seven-single medley) as a premium for every 6 candy bar...
Stellar Company offers an MP3 download (seven-single medley) as a premium for every 6 candy bar wrappers presented by customers together with $3.20. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each download code to the company is $2.95. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2017 and 2018 are as follows. (All purchases and sales are for...
Yeti Company has credit sales of $620,000 during 2013 and estimates at the end of 2013...
Yeti Company has credit sales of $620,000 during 2013 and estimates at the end of 2013 that 1.43% of these credit sales will eventually default. Also, during 2013, a customer defaults on a balance of $524 related to goods purchased in 2012. Prior to the write-off and the adjusting entry, Yeti's accounts receivable $304,000 and allowance for doubtful accounts balances were and $134 (credit), respectively. 1. Estimate the bad debt expense for the period. 2. Prepare the journal entry to...
Vaughn Inc. has a customer loyalty program that rewards a customer with 1 customer loyalty point...
Vaughn 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, 2020, customers purchase products for $340,000 (with a cost of $197,200) and earn 34,000 points redeemable for future purchases. Vaughn expects 29,000 points to be redeemed. Vaughn estimates a standalone selling price of $2.50 per point (or $85,000 total) on the basis of the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT