Question

1. On November 15, 2020, Katie from the small office business Custom Graphics contacted Sarah to purchase gift cards for the holiday season. Katie’s boss gave her $4,000 to purchase 50 gift cards with a value of $80 each from Sarah.
2. During the month of December, 45 of the $80 gift cards were used in full by staff members of Custom Graphics.

3. . Calculate the liability that will remain on the December 31, 2020 balance sheet for Sarah’s Pottery and Gift Store. (Round the final answer to the nearest whole dollar amount.)

   REQUIRED

1-b. Calculate the liability that will remain on the December 31, 2020 balance sheet for Sarah’s Pottery and Gift Store. (Round the final answer to the nearest whole dollar amount.)

Answer 1

	2020
a. Nov. 15	Cash.....................................................................................	4,000
	Unearned revenue...............................................................		4,000
	To record purchase of 50 gift cards, $80 each.
b. Dec 31	Unearned revenue...............................................................	3,600
	Sales Revenue.....................................................................		3,600
	To record 45 gift cards redeemed in December; $80 × 45 = $750.

The liability, unearned revenue will have a balance of $400 on December 31, for $80 × 5 (50-45)= $400