Cayley Gifts Limited is a chain of gift stores. Cayley sells gift cards that can be redeemed

Question:

Cayley Gifts Limited is a chain of gift stores. Cayley sells gift cards that can be redeemed at any of its stores. You are provided with the following information about Cayley's gift cards for the year ended January 31, 2017:

Unredeemed amount on February 1, 2016 .........$110,000

Gift card purchases during fiscal 2017 ............ 370,000

Gift card redemptions during fiscal 2017.......... 325,000

Required
a. What amount should Cayley report for unredeemed gift cards on January 31, 2017?

b. How should this amount be reported in the (which statement)? Explain why it should be reported this way.

c. Suppose that in the past, 5 percent of Cayley's gift cards were never redeemed. How would that affect the amount you report for unredeemed gift cards? What happens to the money customers pay for unredeemed gift cards? Are unredeemed gift cards good or bad for Cayley?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...