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7. AMZN recognizes revenue from product sales after the product has been delivered (and a few...

7. AMZN recognizes revenue from product sales after the product has been delivered (and a few other criteria are met). Based on what you know about revenue recognition, do you think AMZN recognizes revenue from gift cards when the gift card is sold to the customer (YES or NO)? (3 points)

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Answer #1

Answer: NO

Revenue recognition is done when all the obligations are satisfied. Cash received from gift cards should be considered as cash received for future obligations. In this case, companies need to records the cash received as debiting the cash account and crediting the deferred revenue liability. It means the company records cash received as a liability.

When the customer used this gift card. then, this transaction records as debiting the deferred revenue liability and crediting the revenue account.

However, the Company needs to determine the probability (remote likelihood) of the customers that will be used this gift card.

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