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Gamestop Corp. said the following about its gift card sales in its most recent (2019) annual report: “We establish a liability upon the issuance of merchandise credits and the sale of gift cards. Revenue is subsequently recognized when the credits and gift cards are redeemed.” When Gamestop sells a gift card to a customer, what is the impact on Gamestop’s financial statements?     Cash increases and the Income Statement increases     Cash increases and Inventory decreases     Cash increases and Liabilities increase     Cash decreases and the Income Statement decreases     No effect because the customer has not yet used the gift card

Gamestop Corp. said the following about its gift card sales in its most recent (2019) annual report: “We establish a liability upon the issuance of merchandise credits and the sale of gift cards. Revenue is subsequently recognized when the credits and gift cards are redeemed.” When Gamestop sells a gift card to a customer, what is the impact on Gamestop’s financial statements?     Cash increases and the Income Statement increases     Cash increases and Inventory decreases     Cash increases and Liabilities increase     Cash decreases and the Income Statement decreases     No effect because the customer has not yet used the gift card

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Gamestop Corp. said the following about its gift card sales in its most recent (2019) annual report:
“We establish a liability upon the issuance of merchandise credits and the sale of gift cards. Revenue is subsequently recognized when the credits and gift cards are redeemed.”
When Gamestop sells a gift card to a customer, what is the impact on Gamestop’s financial statements?

   

Cash increases and the Income Statement increases
   

Cash increases and Inventory decreases
   

Cash increases and Liabilities increase
   

Cash decreases and the Income Statement decreases
   

No effect because the customer has not yet used the gift card
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