Question

Orange sells gift cards in $15, $25, and $50 increments. Assume Orange sells $20.4 million in iTunes gift cards in November, and customers redeem $13.4 million of the gift cards in December Required: Record the necessary entries in the Journal Entry Worksheet below,

Answer 1

The question involves making journal entries for the sale and redemption of gift cards by a company named Orange, which requires accounting for these transactions as liabilities and revenues respectively.

Step-by-step explanation:

The student's question pertains to accounting entries for gift card sales and redemptions by a company called Orange. When Orange sells gift cards, it records the sales as a liability because it owes the service to the cardholders. Once the gift cards are redeemed, the liability is reduced, and revenue is recognized. The necessary journal entries for recording the sale of $20.4 million in iTunes gift cards would be to debit Cash for $20.4 million and credit Gift Card Liability for the same amount. Later, when $13.4 million of the gift cards are redeemed, the entry would involve debiting Gift Card Liability for $13.4 million and crediting Sales Revenue for $13.4 million.