Liabilities decrease and cash decreases Liabilities increase and the Income Statement decreases Liabilities decrease and the Income Statement increases Liabilities decrease and cash decreases No effect because the transaction was already booked when the customer purchased 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 merchandise to a customer who is using a Gamestop gift card to purchase the merchandise, what is the impact on Gamestop’s financial statements? (Ignore any inventory effects)
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Liabilities decrease and cash decreases |
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Liabilities increase and the Income Statement decreases |
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Liabilities decrease and the Income Statement increases |
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Liabilities decrease and cash decreases |
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No effect because the transaction was already booked when the customer purchased the gift card |
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