At December 31, 2007, Sue's Boutique had 1,000 gift certificates outstanding, which had been sold to customers during 2007 for $50 each.Sue's operates on a gross margin of 60% of its sales.What amount of revenue pertaining to the 1,000 outstanding gift certificates should be deferred at December 31, 2007?

Question

Quizplus · Accepted Answer

The entire $50,000 from the 1,000 gift certificates should be deferred as revenue until they are redeemed, as the revenue recognition principle requires that revenue be recognized when it is earned, not when cash is received.

At December 31, 2007, Sue's Boutique Had 1,000 Gift Certificates