Question

During February 2020, Bonita Massage Ltd. sells $8,000 of gift cards for Valentine’s Day gifts. From...

During February 2020, Bonita Massage Ltd. sells $8,000 of gift cards for Valentine’s Day gifts. From reliable past experience, management estimates that 10% of the gift cards sold will not be redeemed. By the end of February, $5,600 was redeemed by customers. Prepare the journal entries for Bonita Massage for February 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

February 2020

(To record the sale of gift cards)

February 2020

(To record service revenue)

Business   Accounting   
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Answer #1

The journal entries for Bonita Massage for February 2020 are as follows:

Date Account and Explanation Debit($) Credit($)
Feb. 2020 Cash         8,000
       Contract Asset / Liability           8,000
(Recorded the sale of Gift Cards)
Feb. 2020 Contract Asset / Liability ($5,600 / (100% - 10%))           6,222
          Sales Revenue           6,222
(Recorded the service revenue)
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