during its first three months of operation, palomino's sold gift cards in various amounts totaling $5,200. the gift cards are redeemable for meals within one year of the purchase date. gift cards totaling $1,900 were presented for redemption prior to year-end on December 31. the sales tax rate on restaurant sales is 7%, assessed at the time meals (not gift cards) are purchased. palimino's will remit sales taxes in January.

1&2 record (in summary form) the $5,200 in gift cards sold (keeping in mind that, in actuality, each sale if a gift card or a meal would be recorded individually) and the $1,900 in gift cards redeemed. the $1,900 includes a 7% sales tax of $124.40.

1 Record the cash received for the gift cards

2 record the redemption of gift cards