Reporting Unearned Revenue Target sells gift cards that can be used at any of the companys Target stores or on Target.com. Target encodes information on the cards magnetic strip about the cards value and the store where it was purchased. Target gift cards do not have expiration dates.

a. When does Target record revenue from the gift card? i. Two years after the date of the sale, which is when the gift card expires. ii. When the gift card is sold. iii. When the customer uses the gift card, at which point, Target also records an allowance for estimated product returns. iv. 90 days after the date the customer uses the gift card, which is when the product return period expires. Correct answer: b. How will Targets balance sheet reflect the gift card when it is initially sold? i. As an asset: cash and cash equivalents. ii. As an asset: allowance for product sales. iii. As sales revenue. iv. As a liability: unearned revenue. Correct answer: