Exercise 139 Gift Cards LO133 CircuitTown commenced a gift c

Exercise 13-9 Gift Cards [LO13-3] CircuitTown commenced a gift card program in January 2018 and sold $13,550 of gift cards in January, $15,200 in February, and $21,750 In March of 2018 before discontinuing further gift card sales. During 2018, gift card redemptions were $8,300 for the January gift cards sold, $6,000 for the February cards, and $6,000 for the March cards. CircuitTown considers gift cards to be \"broken\"(not redeemable) 10 months after sale 1. How much revenue will CircuitTown recognize with respect to January gift card sales during 2018? 2. Prepare journal entries to record the sale of January gift cards, redemption of gift cards (ignore sales tax), and breakage (expiration) of gift cards. 3. How much revenue will CircuitTown recognize with respect to March gift card sales during 2018? 4. What liability for deferred revenue associated with gift card sales would CircuitTown show as of December 31, 2018? Complete this question by entering your answers in the tabs below. Req 2 Req 1 3 and 4 itTown recognize with respect to January gift card and March gift card sales during 2018. What How much revenue will Circu liability for deferred revenue associated with gift card sales would CircuitTown show as of December 31, 2018? from January gift card sales

Solution

1.

The entire $13,550 sold in January will be recognized as revenue during 2018. $8,300 because of gift cardredemption; $5,250 because of gift card breakage

3. $6000

Of the $21,750 sold in March, $6,000 will be recognized as revenue because of gift card redemption. The remaining $15,750 of sales are not recognized as revenue in 2018 because gift cards sold in March of 2018 won’t start expiring until January 2019

4. $15750

The only liability at 12/31/2018 would be the $15,750 of unexpired March gift cards (21,750 –6,000).