Trying to solve parts of this question. I have searched everywhere, read the chapter, reviewed websites, checked in discussion threads and trial and error'ed so many different answers to get this to work with no success. The question has multiple parts:
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 10-K 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 $1,000 in a state with a sales tax rate of 8%. For this question, assume 10% of all merchandise sold is returned within 90 days. Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction. Note: Indicate a decrease in an account category by including a negative sign with the amount. ($ millions) Transaction In-store sales Contrib. Capital Income Statement Expenses Cash Asset 1,080 Noncash Assets (800) x Inventory Net Income 800 X 0 Earned Capital Revenues 800 x Retained Earnings Revenue 900 Balance Sheet Liabilities 100 Allowances for Sales Returns 80 Sales Tax Payable 100 x = Cash N/A COGS b. Use the financial statement effects template to record the following transaction: On March 4, an internet customer places an order for $2,000 and pays online with a credit card (which is equivalent to cash for accounting purposes). The goods are shipped from the warehouse on March 6, and FedEx confirms delivery on March 7. Ignore shipping costs, sales tax, and returns. Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction. Note: Indicate a decrease in an account category by including a negative sign with the amount. ($ millions) Transaction March 4: Online sale Balance Sheet Liabilities Income Statement Expenses Cash Asset Noncash Assets Contrib. Capital + Earned Capital Revenues Net Income 2,000 0 = 2,000 0 0 0 0 0 Cash N/A Unearned Revenue N/A N/A N/A /A N/A March 7: Goods delivered 0 (1.800) X = (2.000) 0 1,800 X 2,000 1,800 X = 200 x N/A Inventory Unearned Revenue N/A Retained Earnings Revenue COGS 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. $727 $ millions Gift card liability, February 3, 2018 Gift cards issued during current period but not redeemed Revenue recognized from beginning liability Gift card liability, February 2, 2019 645 (532) $840 ($ millions) Transaction May: Gift card sale Balance Sheet Liabilities Cash Asset Noncash Assets Contrib. Capital Income Statement Expenses Earned Capital Revenues Revenues Net Income 0 645 0 645 0 0 0 0 Cash N/A Unearned Revenue N/A N/A N/A N/A > > > May: Gift card redemption 0 645 x = (532) 0 645 X 532 645 X = (113) X N/A Inventory Unearned Revenue N/A Retained Earnings Revenue COGS 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 10-K 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 $1,000 in a state with a sales tax rate of 8%. For this question, assume 10% of all merchandise sold is returned within 90 days. Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction. Note: Indicate a decrease in an account category by including a negative sign with the amount. ($ millions) Transaction In-store sales Contrib. Capital Income Statement Expenses Cash Asset 1,080 Noncash Assets (800) x Inventory Net Income 800 X 0 Earned Capital Revenues 800 x Retained Earnings Revenue 900 Balance Sheet Liabilities 100 Allowances for Sales Returns 80 Sales Tax Payable 100 x = Cash N/A COGS b. Use the financial statement effects template to record the following transaction: On March 4, an internet customer places an order for $2,000 and pays online with a credit card (which is equivalent to cash for accounting purposes). The goods are shipped from the warehouse on March 6, and FedEx confirms delivery on March 7. Ignore shipping costs, sales tax, and returns. Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction. Note: Indicate a decrease in an account category by including a negative sign with the amount. ($ millions) Transaction March 4: Online sale Balance Sheet Liabilities Income Statement Expenses Cash Asset Noncash Assets Contrib. Capital + Earned Capital Revenues Net Income 2,000 0 = 2,000 0 0 0 0 0 Cash N/A Unearned Revenue N/A N/A N/A /A N/A March 7: Goods delivered 0 (1.800) X = (2.000) 0 1,800 X 2,000 1,800 X = 200 x N/A Inventory Unearned Revenue N/A Retained Earnings Revenue COGS 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. $727 $ millions Gift card liability, February 3, 2018 Gift cards issued during current period but not redeemed Revenue recognized from beginning liability Gift card liability, February 2, 2019 645 (532) $840 ($ millions) Transaction May: Gift card sale Balance Sheet Liabilities Cash Asset Noncash Assets Contrib. Capital Income Statement Expenses Earned Capital Revenues Revenues Net Income 0 645 0 645 0 0 0 0 Cash N/A Unearned Revenue N/A N/A N/A N/A > > > May: Gift card redemption 0 645 x = (532) 0 645 X 532 645 X = (113) X N/A Inventory Unearned Revenue N/A Retained Earnings Revenue COGS
