Question
In: Accounting
CircuitTown commenced a gift card program in January 2021 and sold $11,900 of gift cards in...
CircuitTown commenced a gift card program in January 2021 and
sold $11,900 of gift cards in January, $19,450 in February, and
$20,850 in March 2021 before discontinuing further gift card sales.
During 2021, gift card redemptions were $8,100 for the January gift
cards sold, $4,600 for the February cards, and $6,100 for the March
cards. CircuitTown considers gift cards to be “broken” (not
redeemable) 10 months after sale.
Required:
1. How much revenue will CircuitTown recognize
with respect to January gift card sales during 2021?
2. Prepare journal entries to record the sale of
January gift cards, the redemption of gift cards (ignore sales
tax), and breakage (expiration) of gift cards.
3. How much revenue will CircuitTown recognize
with respect to March gift card sales during 2021?
4. What liability for deferred revenue associated
with gift card sales would CircuitTown show as of December 31,
2021?
How much revenue will CircuitTown recognize with respect to January gift card and March gift card sales during 2021? What liability for deferred revenue associated with gift card sales would CircuitTown show as of December 31, 2021?
|
Solutions
Expert Solution
Required 1.
| Revenue Recognized | $11,900 |
Explanation:-
| The entire $11,900 sold in January will be recognized as revenue during 2021. $8,100 because of gift card redemption and $3,800 because of gift card breakage. |
Required 2.
| Event | General Journal | Debit | Credit |
| 1 | Cash | $11,900 | |
| Liability- Unearned gift card revenue | $11,900 | ||
| (To record the sale of January gift card) | |||
| 2 | Liability- Unearned gift card revenue | $8,100 | |
| Revenue- Gift cards | $8,100 | ||
| (To record the redemption of gift cards) | |||
| 3. | Liability- Unearned gift card revenue | $3,800 | |
| Revenue- Gift Cards | $3,800 | ||
| (To record breakage of gift cards) |
Required 3.
| Revenue Recognized | $6,100 |
Explanation:-
| Only redemption of gift cards will be recognized as revenue because March card would expire only in January 2022. |
Required 4.
| Deferred Revenue | $14,750 |
Explanation:-
| The only Liabilities at 12/31/2021 would be $14,750 ($20,850 - $6,100) of unexpired march gift cards. |
ekkarill92 answered 2 years agoRelated Solutions
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