Part A

Apple describes its revenue recognition policy for gift cards (see p. 45 of Apple’s 2017 10K available here) as follows:

“The Company records deferred revenue when it receives payments in advance of the delivery of products or the performance of services. … The Company sells gift cards redeemable at its retail and online stores, and also sells gift cards redeemable on iTunes Store, App Store, Mac App Store, TV App Store and iBooks Store for the purchase of digital content and software. The Company records deferred revenue upon the sale of the card, which is relieved upon redemption of the card by the customer.”

In the following questions, assume that each gift card is worth $67 and that in 2017 Apple sold 1,100,000 gift cards for a total of $73.7 million.

Use the BSE below to record the following transactions:

Apple sells $73.7 million in gift cards in 2017.

Cash	+	Noncash Assets	-	Contra Assets	=	Liabilities	+	Shareholders Equity
unanswered		unanswered		unanswered		unanswered		unanswered

Please solve for the unanswered cells.

Part B

All 1,100,000 gift cards are partially redeemed in 2017. On average, each card is redeemed for $57, and has an average unused balance of $10.

Cash	+	Noncash Assets	-	Contra Assets	=	Liabilities	+	Shareholders Equity
unanswered		unanswered		unanswered		unanswered		unanswered

Please solve for the unanswered cells.

Part C

On December 31, 2018, Apple determines that the average $10 unused balance on the 1,100,000 cards will never be used, so that Apple can keep the unused balance. In the industry, this is called “breakage”.

Cash Asset	+	Noncash Assets	-	Contra Assets	=	Liabilities	+	Shareholders Equity
unanswered		unanswered		unanswered		unanswered		unanswered