On October 1, 2021, a company sells $800 of gift cards to customers. The gift cards...

On October 1, 2021, a company sells $800 of gift cards to customers. The gift cards expire one year from the date of sale. By October 1, 2022, $750 of the gift cards have been redeemed and the sales recorded at the time of redemption. What entry, if any, should the company record on October 1, 2022?

A) Debit Sales Revenue, $50; credit Cash, $50. B) Debit Cash, $750; credit Sales Revenue, $750. C) Debit Deferred Revenue, $50; credit Sales Revenue, $50. D) No journal entry is necessary.

Solutions

Expert Solution

Gifts card not redeemed are the income for the company. Hence a journal entry for recognition of revenue is to be made

Therefore Deferred revenue must be debited and sales revenue must be credited by the amount that has not been redeemed

Journal entry for unredeemed gift cards

Deferred revenue $50

To sales Revenue $50

Therefore option C is the correct answer.

ekkarill92 answered 1 year ago

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