During February, the last month of the fiscal year, Be My Valentine Ltd. sells $20,400 of...

During February, the last month of the fiscal year, Be My Valentine Ltd. sells $20,400 of gift cards. From experience, management estimates that 8% of the gift cards sold will not be redeemed by customers. In March, $4,600 of these cards is redeemed for merchandise with a cost of $3,100. In April, further $11,500 of these cards is redeemed for merchandise with a cost of $3,800. The company uses a perpetual inventory system. Also in February, Be My Valentine had $1,000 of unused gift cards that were over one year old and were not expected to be used. The amount was in line with the company’s normal breakage and all other gift cards of the same age had been used. Prepare journal entries to record the transactions for February, March, and April. (Enter debit entries first followed by credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 125.)

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Expert Solution

Date	Accounting Descriptions	Dr.	Cr.
Feb	Debtors A/c Dr.	20400
	To Sale of Gift Cards A/c		20400
	( Being Sale of Gift Cards Made)
March	Redemption of Gift Cards Ex[penses A/c Dr.	3100
	To Debtors A/c		3100
	( Being Gift cards Redeemed)
March	Redemption of Gift Cards Ex[penses A/c Dr.	3800
	To Provision of Redemption of Gift Cards Expenses A/c		3800
	( Being Provision mAde on year end)
March	P and L A/c Dr.	1000
	To Inventory A/c		1000
	( Being Gift Cards aged more than One year written off)
March	Redemption of Gift Cards Ex[penses A/c Dr.	2668
	To Provision of Redemption of Gift Cards Expenses A/c		2668
	( Being Provision mAde on year end)
April	Provision of Redemption of Gift Cards Expenses A/c	3800
	To Cash A/c		3800
	( Being Provision expenses for Redemption cleared off)

ekkarill92 answered 1 year ago

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