Question

Circuit Town commenced a gift card program in January 2018 and sold $13,500 of gift cards in January. $18.950 in February, and $20,000 in March of 2018 before discontinuing further gift card sales. During 2018, gift card redemptions were $7.200 for the January gift cards sold, 55,650 for the February cards, and $6,600 for the March cards. Circuit Town considers gift cards to be "broken" (not redeemable) 10 months after sale. Required: 1. How much revenue Will Circuit Town recognize with respect to January gift card sales during 2018? 2. Prepare journal entries to record the sale of January gift cards, redemption of gift cards ignore sales tax), and breakage (expiration of gift cards. 3. How much revenue will Circuit Town recognize with respect to March gift card sales during 2018? 4. What liability for deferred revenue associated with gift card sales would Circuit Town show as of December 31, 2018? Complete this question by entering your answers in the tabs below. Reg 2 Req 1 3 and 4 Prepare journal entries to record the sale of January gift cards, redemption of gift cards (ignore sales tax), and breakage (expiration of gift cards. (If no entry is required for a transaction event, select "No journal entry required in the first account field.) View transaction list Journal entry worksheet Record the January gift card sales.

Answer 1

Answers (1) Revenue recognized in 2018 with respect to January | gift card, sales $13,500 out of this $7,200 will be gift card redemptions and $ 6,300 gift card breakage (2) Journal Entry Date particulars Ale do $13,500 Cash To liability-unearned gift card revenue Liability uneared gift card revenue Ale dr $ 7,200 TO sales revenue $7200 Liabily-unlarned gift card revenue As $ 6300 TO Revenue - gift cardy $ 6300 Debit I credit $ 13,500 (3) Revenue circuit Town will recognize with respect to March gift card sales during 2018 $6,600 Only redemption will be taken into account as the march Cardy would expire only in Jour 2019 It is assumed that gift card sally occur halb way through each month on average. 14 Liability for deffered revenue associated with gift card sally as of Dec 31 2018 This would be $13,400 $20,000-$ 6,600)