Shawn Company sells gift certificates worth P8,000,000 to customers in exchange for future delivery of its product. The gift certificates are nonrefundable by the customer and the entity expects that 15% of the gift certificates will not be redeemed. During the current year, the entity redeemed gift certificates worth P2,975,000. Required: 1. Compute the expected value of breakage. 2. Compute the expected value of gift certificates to be redeemed. 3. Compute the breakage revenue. 4. Prepare the journal entries to record the sale of gift certificates and the redemption of gift certificates.

Shawn Company sells gift certificates worth P8,000,000 to customers in exchange for future delivery of its product. The gift certificates are nonrefundable by the customer and the entity expects that 15% of the gift certificates will not be redeemed. During the current year, the entity redeemed gift certificates worth P2,975,000. Required: 1. Compute the expected value of breakage. 2. Compute the expected value of gift certificates to be redeemed. 3. Compute the breakage revenue. 4. Prepare the journal entries to record the sale of gift certificates and the redemption of gift certificates.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6MC

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Problem 2-11 (IFRS) Marie Company sells gift certificates worth P2,500,000 to customers in exchange for future delivery of its product. The gift certificates are nonrefundable by the customer and the entity expects that 5% of the gift certificates will not be redeemed. During the current year, the entity redeemed gift certificates worth P1,425,000. Required: 1. Compute the expected value of breakage. 2. Compute the expected value of gift certificates to be redeemed. 3. Compute the breakage revenue. 4. Prepare the journal entries to recognize the sale of gift certificates and the redemption of gift certificates. Problem 2-12 (IFRS) Shawn Company sells gift certificates worth P8,000,000 to customers in exchange for future delivery of its product. The gift certificates are nonrefundable by the customer and the entity expects that 15% of the gift certificates will not be redeemed. During the current year, the entity redeemed gift certificates worth P2,975,000. Required: 1. Compute the…
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