Sarahs Pottery and Gift store had the following transactions:

a. On November 15, 2015, Katie, from a small office business, Custom Graphics, contacted Sarah to purchase gift cards for the holiday season. Katies boss gave her $2,500 to purchase 50 gift cards with a value of $50 each from Sarah. b. During the month of December, 40 of the $50 gift cards were used in full by staff members of Custom Graphics.

Required:

1-a. Prepare the journal entries for each of the transactions.

1-b. Calculate the liability that will remain on the December 31, 2015 balance sheet for Sarahs Pottery and Gift Store. (Round the final answer to the nearest whole dollar amount.)