Reitmans includes among its current liabilities $22,278,000 for "Deferred revenue." Notes 3(1) and 13 provide additional information about this account.
a. When does Reitmans recognize revenue from sales in its stores?
b. Deferred revenue arises from two sources. Describe the transactions that give rise to each. How much deferred revenue is attributable to each source?
c. Why is deferred revenue reported as a liability? What obligation does Reitmans have? How is the liability satisfied? What does Reitmans sacrifice by fulfilling the liability?
d. A customer purchases a $100 gift card at a Reitmans store. What journal entry would be made to record the purchase? (Alternative approach: Use an accounting equation spreadsheet to record an increase in deferred revenue.)
e. A customer purchases $155 of goods at a Reitmans store using a $100 gift card and paying the remainder in cash. What journal entry would Reitmans make to record the sale? (Alternative approach: Use an accounting equation spreadsheet to record a decrease in deferred revenue.)