CircuitTown commenced a gift card program in January 2018 and sold $10,000 of gift cards in January, $15,000in February, and $16,000 in March 2018 before discontinuing further gift card sales. During 2018, gift cardredemptions were $6,000 for the January gift cards sold, $4,500 for the February cards, and $4,000 for the Marchcards. CircuitTown considers gift cards to be “broken” (not redeemable) 10 months after sale.Required:1. How much revenue will CircuitTown 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), andbreakage (expiration) of gift cards.3. How much revenue will CircuitTown recognize with respect to March gift card sales during 2018?4. What liability for deferred revenue associated with gift card sales would CircuitTown show as of December31, 2018?
CircuitTown commenced a gift card program in January 2018 and sold $10,000 of gift cards in January, $15,000
in February, and $16,000 in March 2018 before discontinuing further gift card sales. During 2018, gift card
redemptions were $6,000 for the January gift cards sold, $4,500 for the February cards, and $4,000 for the March
cards. CircuitTown considers gift cards to be “broken” (not redeemable) 10 months after sale.
Required:
1. How much revenue will CircuitTown recognize with respect to January gift card sales during 2018?
2. Prepare
breakage (expiration) of gift cards.
3. How much revenue will CircuitTown recognize with respect to March gift card sales during 2018?
4. What liability for deferred revenue associated with gift card sales would CircuitTown show as of December
31, 2018?
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