Maffett Ticket Brokers is a reseller of tickets to sporting events and concerts. During 20X1, Maffett sold gift cards totaling $250,000. Based on past experience, Maffett expects that 1% of the gift card purchases will not be redeemed by the time they expire, five years after issuance. During 20X1, $150,000 of the gift card purchases from 20X1 were used to purchase tickets that had cost Maffett $90,000. Required: 1. Prepare the journal entry Maffett uses to record its activity related to the above transactions in 20X1, assuming state law does not require Maffett to remit the breakage to the state. 2. Prepare the journal entry Maffett uses to record its activity related to the above transactions in 20X1, assuming state law requires Maffett to remit the breakage to the state upon expiration of a gift card.

Maffett Ticket Brokers is a reseller of tickets to sporting events and concerts. During 20X1, Maffett sold gift cards totaling $250,000. Based on past experience, Maffett expects that 1% of the gift card purchases will not be redeemed by the time they expire, five years after issuance. During 20X1, $150,000 of the gift card purchases from 20X1 were used to purchase tickets that had cost Maffett $90,000. Required: 1. Prepare the journal entry Maffett uses to record its activity related to the above transactions in 20X1, assuming state law does not require Maffett to remit the breakage to the state. 2. Prepare the journal entry Maffett uses to record its activity related to the above transactions in 20X1, assuming state law requires Maffett to remit the breakage to the state upon expiration of a gift card.

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Description: Maffett Ticket Brokers is a reseller of tickets to sporting events and concerts. During 20X1, Maffett sold gift cards totaling $250,000.Based on past experience, Maffett expects that 1% of the gift card purchases will not be redeemed by the time the

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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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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Question

Maffett Ticket Brokers is a reseller of tickets to sporting events and concerts. During 20X1, Maffett sold gift cards totaling $250,000.
Based on past experience, Maffett expects that 1% of the gift card purchases will not be redeemed by the time they expire, five years
after issuance.
During 20X1, $150,000 of the gift card purchases from 20X1 were used to purchase tickets that had cost Maffett $90,000.
Required:
1. Prepare the journal entry Maffett uses to record its activity related to the above transactions in 20X1, assuming state law does not
require Maffett to remit the breakage to the state.
2. Prepare the journal entry Maffett uses to record its activity related to the above transactions in 20X1, assuming state law requires
Maffett to remit the breakage to the state upon expiration of a gift card.

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