Question

Peterson Photoshop sold $1,200 in gift cards on special promotion on October 15, 2021, and sold $1,800 in gift cards on another special promotion on November 15, 2021. Of the cards sold in October, $120 were redeemed in October, $300 in November, and $360 in December. Of the gift cards sold in November, $180 were redeemed in November and $420 were redeemed in December. Peterson views the probability of redemption of a gift card as remote if the card has not been redeemed within two months. At 12/31/2021, Peterson would show a deferred revenue account for the gift cards with a balance of Multiple Choice $1,620. $1,200. $1,800. $0.

Answer 1

The correct answer is: $1200

Workings

To determine the amount of deferred revenue we need to focus primarily on the Nov & Dec data

Total Sales of gift cards for Nov = $1800

Less: Redemption of Cards in Nov = $180

Less: Redemption of Cards in Dec = $420

Deferred Revenue = 1800-180-420 = $1200

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