Indigo Books & Music Inc.is Canada's largest book, gift, and specialty toy retailer.Exhibits 1and2contain excerpts from the company's consolidated financial statements dated April 1, 2017.

Exhibit 1: Excerpt from Indigo Books & Music Inc.'s Consolidated Statements of Changes in Equity

(in thousands of Canadian dollars)

RETAINED EARNINGS

2017

2016

Balance, beginning of year

124,089

95,508

Net Income

20,918

28,581

Dividends Declared

Balance, end of year

145,007

124,089

Exhibit 2: Excerpt from Note 3 of Indigo Books & Music Inc.'s 2017 Financial Statements

"The Company recognizes revenue from unredeemed gift cards ("gift card breakage") if the likelihood of gift card redemption by the customer is considered to be remote. The Company estimates its average gift card breakage rate based on historical redemption rates. The resulting revenue is recognized over the estimated period of redemption based on historical redemption patterns commencing when the cards are sold."

Required: Answer the following questions and explain. Please provide your response in the highlighted column below.

Required

a.Prepare the closing entries that would have been required to close the Income Summary account.

b.The company has a balance of unearned gift card liability of $50,396 thousand as at April 1, 2017. Prepare the relevant journal entries related to the selling and redeeming of gift cards.

c.The company has prepaid expenses of $11,706 thousand as at April 1, 2017. Identify two of Indigo's likely prepaid expenses and when they would be expensed.