Question

A local starbucks sells gift cards of 10,000 during the year. By the end of the year, customers have redeemed 8,000 of gift cards. What will be the year-end balance in the deferred revenue account?

1) 10,000
2) 8,000
3) 0
4) 2,000

Answer 1

The year-end balance in the deferred revenue account for a Starbucks that sold $10,000 in gift cards and had $8,000 redeemed by the end of the year would be $2,000. This figure represents unredeemed gift cards that customers may still use.

Step-by-step explanation:

The student's question pertains to the calculation of the year-end balance in the deferred revenue account for a Starbucks that sells gift cards. When customers purchase gift cards, this is recorded as deferred revenue because the company has an obligation to provide goods or services in the future.

During the year, Starbucks sold $10,000 worth of gift cards, and by the end of the year, customers have redeemed $8,000 of those gift cards. This means that there is still a liability of $2,000, which reflects the value of the gift cards that the customers have not yet redeemed. Therefore, the year-end balance in the deferred revenue account would be $2,000.