Accounting for Gift Cards Assume Ikeo Inc. sold $160,000 of gift cards during the last two weeks of December 2020. No gift cards were redeemed
Accounting for Gift Cards
Assume Ikeo Inc. sold $160,000 of gift cards during the last two weeks of December 2020. No gift cards were redeemed in 2020, while $144,000 of the gift cards were redeemed for store purchases during 2021. On December 31, 2021, Ikeo Inc. calculates the remaining balance of unredeemed gift cards of $16,000 ($160,000 less $144,000). Based on previous experiences, Ikeo estimates gift card breakage to be 5% of total gift card sales. Ikeo uses the proportional method to recognize income on gift card breakage.
Required
a. Record the sale of gift cards in 2020.
b. Record the redemption of gift cards in 2021.
c. Record revenue in 2021 due to gift card breakage using the proportional method.
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When dealing with accounting for gift cards we need to record transactions when the gift cards are sold when they are redeemed and when we recognize a... View full answer
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Authors: Glenn Owen
3rd Edition
0357391691, 9780357391693
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