Indigo Books & Music Inc. is Canada’s largest book, gift, and specialty toy retailer. Exhibits 3.28 and 3.29 contain excerpts from the company’s consolidated financial statements dated April 1, 2017.

EXHIBIT 3.28 Excerpt from Indigo Books & Music Inc.’s Consolidated Statements of Changes in Equity

EXHIBIT 3.29 Excerpt from Note 3 of Indigo Books & Music Inc.’s 2017 Financial Statements    
“The Company recognizes revenue from unredeemed gift cards (“gift card breakage”) if the likelihood of gift card redemption by the customer is considered to be remote. The Company estimates its average gift card breakage rate based on historical redemption rates. The resulting revenue is recognized over the estimated period of redemption based on historical redemption patterns commencing when the cards are sold.”

Required

a. Prepare the closing entries that would have been required to close the Income Summary account. 

b. The company has a balance of unearned gift card liability of $50,396 thousand as at April 1, 2017. Refer to Exhibit 3.29 and explain the note in your own words.

c. The company has prepaid expenses of $11,706 thousand as at April 1, 2017. Identify two of Indigo’s likely prepaid expenses and when they would be expensed.

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(in thousands of Canadian dollars) RETAINED EARNINGS Balance, beginning of year Net Income Dividends Declared Balance, end of year 2017 2016 95,508 28,581 124,089 20,918 145,007 124,089