Revenue Recognition and Sales Allowances Target Corporation reported the following on its income statement For 12 Months Ended ($ millions) Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Total revenue $75,356 $72,714 $70,271 Cost of sales 53,299 51,125 49,145 The revenue recognition footnote from the 10K for the year ended February 2, 2019, includes the following We record almost all retail store revenues at the point of sale Digital channel sales include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store Total revenues do not include sales tax because we are a pass through conduit for collecting and remitting sales taxes Generally, guests may return national brand merchandise within 90 days of purchase and owned and exclusive brands within one year of purchase Revenues are recognized net of expected returns, which we estimate using historical return patterns as a percentage of sales and our expectations of future returns Revenue from gift card sales is recognized upon gift card redemption Our gift cards do not expire Based on historical redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as breakage Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions Guests receive a 5 percent discount on virtually all purchases and receive free shipping at Target com when they use their REDcard This discount is included as a sales reduction in our Consolidated Statements of Operations and was $953 million, $933 million, and $899 million in the fiscal years ended February 2019, 2018, and 2017 respectively Required a Use the financial statement effects template to record retail cash sales of $1,000 in a state with a sales tax rate of 8 For this question, assume 10 of all merchandise sold is returned within 90 days Note For each account category, indicate the appropriate account name Enter N A for any account category that is not used for a given transaction Note Indicate a decrease in an account category by including a negative sign with the amount Balance Sheet Income Statement Transaction Cash Asset Noncash Assets Liabilities Contrib Capital Earned Capital Revenues Expenses Net Income In store sales Answer Answer Answer Answer Answer Answer Answer Answer AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A 80 AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A b Use the financial statement effects template to record the following transaction On March 4, an internet customer places an order for $2,000 and pays online with a credit card (which is equivalent to cash for accounting purposes) The goods are shipped from the warehouse on March 6, and FedEx confirms delivery on March 7 Ignore shipping costs, sales tax, and returns Note For each account category, indicate the appropriate account name Enter N A for any account category that is not used for a given transaction Note Indicate a decrease in an account category by including a negative sign with the amount Balance Sheet Income Statement Transaction Cash Asset Noncash Assets Liabilities Contrib Capital Earned Capital Revenues Expenses Net Income March 4 Online sale Answer Answer Answer Answer Answer Answer Answer Answer AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A March 7 Goods delivered Answer Answer Answer Answer Answer Answer Answer Answer AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A c Use the financial statement effects template to record the gift card activity during the fiscal year ended February 2, 2019 Ignore sales tax and returns Details are as follows Note For each account category, indicate the appropriate account name Enter N A for any account category that is not used for a given transaction Note Indicate a decrease in an account category by including a negative sign with the amount $ millions Gift card liability, February 3, 2018 $727 Gift cards issued during current period but not redeemed 645 Revenue recognized from beginning liability (532) Gift card liability, February 2, 2019 $840 Balance Sheet Income Statement Transaction Cash Asset Noncash Assets Liabilities Contrib Capital Earned Capital Revenues Expenses Net Income May Gift card sale Answer Answer Answer Answer Answer Answer Answer Answer AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A May Gift card redemption Answer Answer Answer Answer Answer Answer Answer Answer AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN A d Determine the amount of revenue Target collected from customers who used their loyalty card (REDcard) for each of the fiscal years reported above What proportion of total revenues come from REDcard customers each year Note Round percentage to one decimal place (for example, enter 6 7 for 6 6555 ) Fiscal Year Ended Revenue Collected REDcard transactions to Total sales 2019 Answer Answer 2018 Answer Answer 2017 Answer Answer Does the loyalty program seem to be working Answer Yes No

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Revenue Recognition and Sales Allowances Target Corporation reported the following on its income statement. For 12 Months Ended ($ millions) Feb. 2, 2019 Feb. 3,

Revenue Recognition and Sales Allowances Target Corporation reported the following on its income statement.

For 12 Months Ended ($ millions)	Feb. 2, 2019	Feb. 3, 2018	Jan. 28, 2017
Total revenue	$75,356	$72,714	$70,271
Cost of sales	53,299	51,125	49,145

The revenue recognition footnote from the 10K for the year ended February 2, 2019, includes the following. We record almost all retail store revenues at the point of sale. Digital channel sales include shipping revenue and are recorded upon delivery to the guest or upon guest pickup at the store. Total revenues do not include sales tax because we are a pass-through conduit for collecting and remitting sales taxes. Generally, guests may return national brand merchandise within 90 days of purchase and owned and exclusive brands within one year of purchase. Revenues are recognized net of expected returns, which we estimate using historical return patterns as a percentage of sales and our expectations of future returns. Revenue from gift card sales is recognized upon gift card redemption. Our gift cards do not expire. Based on historical redemption rates, a small and relatively stable percentage of gift cards will never be redeemed, referred to as breakage. Estimated breakage revenue is recognized over time in proportion to actual gift card redemptions. Guests receive a 5 percent discount on virtually all purchases and receive free shipping at Target.com when they use their REDcard. This discount is included as a sales reduction in our Consolidated Statements of Operations and was $953 million, $933 million, and $899 million in the fiscal years ended February 2019, 2018, and 2017 respectively.

Required a. Use the financial statement effects template to record retail cash sales of $1,000 in a state with a sales tax rate of 8%. For this question, assume 10% of all merchandise sold is returned within 90 days. Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction. Note: Indicate a decrease in an account category by including a negative sign with the amount.

	Balance Sheet									Income Statement
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contrib. Capital	+	Earned Capital	Revenues	Expenses	=	Net Income
In-store sales	Answer		Answer	=	Answer		Answer		Answer	Answer	Answer	=	Answer
	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A
					80
					AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A

b. Use the financial statement effects template to record the following transaction: On March 4, an internet customer places an order for $2,000 and pays online with a credit card (which is equivalent to cash for accounting purposes). The goods are shipped from the warehouse on March 6, and FedEx confirms delivery on March 7. Ignore shipping costs, sales tax, and returns. Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction. Note: Indicate a decrease in an account category by including a negative sign with the amount.

	Balance Sheet									Income Statement
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contrib. Capital	+	Earned Capital	Revenues	Expenses	=	Net Income
March 4: Online sale	Answer		Answer	=	Answer		Answer		Answer	Answer	Answer	=	Answer
	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A
March 7: Goods delivered	Answer		Answer	=	Answer		Answer		Answer	Answer	Answer	=	Answer
	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A

c. Use the financial statement effects template to record the gift card activity during the fiscal year ended February 2, 2019. Ignore sales tax and returns. Details are as follows. Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction. Note: Indicate a decrease in an account category by including a negative sign with the amount.

$ millions
Gift card liability, February 3, 2018	$727
Gift cards issued during current period but not redeemed	645
Revenue recognized from beginning liability	(532)
Gift card liability, February 2, 2019	$840

	Balance Sheet									Income Statement
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contrib. Capital	+	Earned Capital	Revenues	Expenses	=	Net Income
May: Gift card sale	Answer		Answer	=	Answer		Answer		Answer	Answer	Answer	=	Answer
	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A
May: Gift card redemption	Answer		Answer	=	Answer		Answer		Answer	Answer	Answer	=	Answer
	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A		AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A	AnswerAccounts PayableAllowances for Sales ReturnsCashCOGSInventoryRetained EarningsRevenueSales Tax ExpenseSales Tax PayableUnearned RevenueN/A

d. Determine the amount of revenue Target collected from customers who used their loyalty card (REDcard) for each of the fiscal years reported above. What proportion of total revenues come from REDcard customers each year? Note: Round percentage to one decimal place (for example, enter 6.7% for 6.6555%).