Question

G Image result for pla... Maps Web Store G Gmail Vocabulary Saved Assignment 0 Bavarian Bar and Grill opened for business in November 2021. During its first two months of operation, the restaurant sold gift cards in various amounts totaling $8,000, mostly as Christmas presents. They are redeemable for meals within two years of the purchase date, although experience within the industry indicates that 80% of gift cards are redeemed within one year. Gift cards totaling $2,700 were presented for redemption during 2021 for meals having a total price of $3,100. The sales tax rate on restaurant sales is 4%, assessed at the time meals (not gift cards) are purchased. Sales taxes will be remitted in January Required: 1. Prepare the appropriate journal entries (in summary form) for the gift cards and meals sold during 2021 (keeping in mind that, in actuality, each sale of a gift card or a meal would be recorded individually) 2. Determine the liability for gift cards to be reported on the December 31, 2021, balance sheet. 3. What is the appropriate classification (current or noncurrent) of the liabilities at December 31, 2021? be recorded individual 2021, balance sheet 2021? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the appropriate Journal entries (in summary form) for the gift cards and meals sold during 2021 (keeping in mind that, in actuality, each sale of a gift card or a meal would be recorded individually). (If no entry is required for a transaction/event, select "No Journal entry required in the first account feld) View transaction in View journal entry worksheet No Event General Journal Debit Credit Cash Delored gift card revenue Cash Deferred and revenue Sales revenue 2.700 Sales taxes Required 2 >

Answer 1

1. Journal entries:

Account	Debit	Credit
Cash	$8,000
Gift Card Liability		$8,000
Cash [$3,100 + (4% * $3,100) - $2,700]	$524
Gift Card Liability	$2,700
Sales revenue		$3,100
Sales tax payable (4% * $3,100)		$124

2. Liability to be reported:

Gift Cards Sold	$8,000
Less: Gift Cards Redeemed	-$2,700
Gift Card Liability	$5,300

3. Appropriate classification:

Current Liability
Gift Cards Sold	$8,000
Estimated % redeemed within 1 year	80%
Estimated current liability before redemption ($8,000 * 80%)	$6,400
Less: Gift Cards Redeemed	-$2,700
Remaining gift certificates classified as current liability	$3,700
Sales tax payable	$124
Non-Current Liability
Unredeemed Gift Cards	$5,300
Less: Current portion of unredeemed certificates	-$3,700
Gift certificates classified as non-current liability	$1,600