[gmh281]

How do you record the following:

Best Buys "Reward Zone" incentive plan shoppers earn $5 on every $125 purchases. Best buy initially deducted the Reward Zone dollars from revenue. Assume that Best Buy has $125,000 in revenues and allows $5,000 in "Reward Zone" dollars. Prepare the journal entries that Best Buy would make to record these two transaction. :confused:

[Superfly999]

What do you think the journal entries are? Try and attempt it first, but here's a hint ;) what type of account do you think discounts are?

[gmh281]

I did try... I thought gift card revenues (earned and unearned) let me know, At this point I am old and getting confused! :D

[Superfly999]

Well, what I think the entries would be would be to Sales, for the $125,000 in revenue, and Reward Zone Discount Allowance. The reason why I put discount "allowance" is because they allow up to $5,000 in discounts and put back for that every period (or however long they allow 5000); if they don't go over that they just move what they have left in discount allowances to the next period. Best buy initially deducted the Reward Zone dollars from revenue; discounts are added to the revenue account when entered in the income statement to be deducted at the end of period. I am not 100% sure on all of this though but I believe this is correct.

[gmh281]

You are probably correct. While I was at work today I did more reading and your answer makes sense... I guess I will find out soon! Thanks for your help! ;)