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03-2 c Back to USSR - rev recog - USSR has not offered...

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Case 03-02 Back To The USSR Universal School Supply Retailer, Inc. (“USSR”), a public company, is a retailer specializing in clothing, equipment, supplies, and other products targeted at grade school, high school, and college students. USSR is offering a back-to-school promotion during the month of August in which customers who spend a minimum of $100 will receive a $20 gift card that can be applied to their next purchase at USSR. The gift cards expire on November 1 and cannot be redeemed for cash. Notwithstanding, management anticipates that between 50% and 85% of the gift cards will be redeemed.
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Unformatted text preview: USSR has not offered similar promotions in the past and does not have an established accounting policy for such promotions. USSR’s merchandise margin is approximately 50%. Required: • If a customer purchases $100 of merchandise during the promotion and as such receives a $20 gift card, how should USSR account for the transaction? • If the gift card is subsequently redeemed or expires unused, how should USSR account for the redemption or expiration? Copyright 2001 Deloitte Development LLC All Rights Reserved....
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