Juno Boutique Inc. (Juno) operates a chain of fashion boutiques. In 2013, Juno began offering gift cards
Question:
Juno Boutique Inc. (Juno) operates a chain of fashion boutiques. In 2013, Juno began offering gift cards for sale to customers.
The cards can be exchanged for any merchandise in Juno’s stores, but they can’t be redeemed for cash. During 2013, gift cards worth $112,000 were sold. By the end of the year, $65,000 of the gift cards had been redeemed by customers who purchased merchandise that cost Juno $37,000.
Required:
a. Prepare the journal entry required to record the sale of the gift cards.
b. Prepare the journal entry required to record the redemption of the gift cards.
c. How would the unused gift cards be reported in Juno’s financial statements?
d. What effect does the sale of gift cards have on Juno’s current ratio?
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