Kiki

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May 2, 2020 at 3:52 pm #569808
toushiga
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Sir, for specimen 2 applicable from sept 18 Q4(a)(i) “Kiki”
1.What mean of breakage for the gift card?
2.Why the amount recognised as revenue is more than $1 ($1.43) for every $1 redeemed?
Thank you.
May 4, 2020 at 2:23 pm #569927
Stephen Widberg
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I t means that, if a customer redeems 70% of their points, it’s fair to assume that they won’t bother to redeem the other 30%.
Don’t worry about the terminology breakage – no one would ever write that in an exam answer.
May 5, 2020 at 2:18 pm #570029
toushiga
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Why the $1 is divided by 70 and times 100? [$1·43 ($1 x 100/70)]
Thanks.
May 5, 2020 at 3:16 pm #570039
Stephen Widberg
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If the voucher is for 100, and the customer redeems 70, assumption (based on past experience) is that they will not bother to redeem the other 30. So when the customer uses card and takes 70-worth of goods, company will book 100 in revenue.
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