Chapter 4
Current Liabilities
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AP-21A (
8
)
Canada File is a retail company that sells stationary across Canada. The company offers a
customer loyalty program whereby customers are rewarded one cent of “Canada File Money”
(CFM) for every $1 purchase. The CFM resembles a real bank note, has no expiry date and
can be used by customers as a discount toward future purchases at any Canada File store.
In January 2016, Canada File made sales of $400,000. Historically, an average of 75% of CFM
issued is redeemed.
Required
a) Prepare the journal entry to record the issuance of CFM in January 2016.
Date
Account Title and Explanation
Debit
Credit
b) In February, Canada File had sales of $500,000, of which $498,000 was received in cash
and $2,000 was redeemed using the CFM. Prepare the journal entry to record the sales
through cash and CFM redemption in February.
Date
Account Title and Explanation
Debit
Credit
