It Is Early in February 2017 and You Are Conducting

question 72

Essay

It is early in February 2017 and you are conducting the audit of Blast Off Airline's 2016 financial statements.Through discussion with Blast Off's Chief Financial Officer you learn of matters that have not yet been incorporated into the 2016 financial statements:
During 2016,Blast Off began a customer loyalty program.For each aeronautical mile that a passenger travels on a paid flight,the passenger accrues one flight mile.Passengers can redeem accrued flight miles for free air travel.Earned miles do not expire.Blast Off's analysis of its competitors' programs suggests an average redemption rate of 55%.In 2016,Blast Off awarded 50,000,000 flight miles,1,375,000 of which were redeemed.Management estimates the fair value of the flight miles is $540,000.
Requirement:
Prepare the journal entries to record the required adjustments for the above event.

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Definitions:

Repeat Customers

Consumers who make purchases from the same company or brand on more than one occasion, demonstrating loyalty or satisfaction.

User-friendly

Describes products or systems that are easy to use or interact with, often requiring minimal effort to understand or operate.

Fraud Complaints

Grievances filed by consumers or entities regarding deceitful activities or transactions believed to be fraudulent.

Federal Trade Commission

A U.S. federal agency established to protect consumers and ensure a strong competitive market by enforcing antitrust and consumer protection laws.