Question

Cullumber sells 20 nonrefundable $90 gift cards for 3D printer paper on March 1, 2020. The paper has a standalone selling price of $90 (cost $72). The gift cards expiration date is June 30, 2020. Cullumber estimates that customers will not redeem 10% of these gift cards. The pattern of redemption is as follows.

		Redemption Total
March 31		50	%
April 30		80
June 30		85

Prepare the 2020 journal entries related to the gift cards at March 1, March 31, April 30, and June 30. (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 present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971.)

Answer 1

Date	Particulars	Debit ($)	Credit ($)
March 1	Cash (900*20)	1800
	Gift card liability		1800
	(To record gift card liability)
Mar 1	Gift card liability (20*900*10%)	180
	Revenue		180
	(To record non-redemption estimation)
Mar 31	Gift card liability (1800*50%)	900
	Revenue		900
	(To record redemption of gift cards)
	Cost of goods sold (20*72*50%)	720
	Inventory		720
	(To record cost of goods sold)
April 30	Gift card liability (1800*30%)	540
	Revenue		540
	(To record redemption of gift cards)
	Cost of goods sold (20*72*30%)	432
	Inventory		432
	(To record cost of goods sold)
June 30	Gift card liability (1800*5%)	90
	Revenue		90
	(To record redemption of gift cards)
	Cost of goods sold (20*72*5%)	72
	Inventory		72
	(To record cost of goods sold)
June 30	Gift card liability (1800*5%)	90
	Revenue
	(To record remaining part of gift cards)		90