Chapter 8, Problem 8.6BP

Login’s Roadhouse opened a new restaurant in November During its first two months of operation, the restaurant sold gift cards in various amounts totaling $2,300. The cards are redeemable tor meals within one year of the purchase date. Gift cards totaling $742 were presented for redemption during the-first two months of operation prior to year-end on December 31. The sales tax rate on restaurant sales is 6%, assessed at lire time meals (not gift cards) are purchased. Logan’s will remit sales taxes in January.

Required:

  1    Record (in summary form) the $2,300 in gill cards sold (keeping in mind that, in actuality, each sale of a gift card or a meal would be recorded individually).

  2    Record the $742 in gift cards redeemed (Hint the $742 includes a 6% sales tax of $42.)

  3    Determine the balance in the Deferred Revenue account (remaining liability for gift cards) to be reported on the December 31 balance sheet