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There are many situations in business where it is difficult to determine the proper period in which to record revenue. Suppose you are advising the
There are many situations in business where it is difficult to determine the proper period in which to record revenue. Suppose you are advising the manager of a consumer electronics store. As part of expansion, the store has begun selling gift cards. The cards are available in any dollar amount and allow the holder of the card to purchase an item for up to 2 years from the time the card is purchased. If the card is not used during those 2 years, it expires. Answer the following questions: At what point should the revenue from the gift cards be recognized (recorded) in the accounting records? Should the revenue be recognized at the time the card is sold, or should it be recorded when the card is redeemed? Or at some other point(s) in time? What if gift cards are never used (expire)? Explain the reasoning to support your answers. Consider the revenue recognition principle, and the adjusting entries that might be made with respect to gift cards
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