Use the following information for questions 34-35.
Malaya's Manicures sells $2,500 worth of gift certificates in November and December. 25% of the gift certificates are redeemed in December prior to the December 31 year end.
-The required year end adjusting entry is

Question

Quizplus · Accepted Answer

The adjusting entry is necessary to recognize the portion of the gift cards that have been redeemed in December prior to year end. Since 25% of the gift cards were redeemed, the portion of revenue that should be recognized is $625 ($2,500 x 25%). The entry would be to debit Deferred Gift Card Revenues for $625 and credit Revenues for $625, as this recognizes the revenue in the current period and reduces the liability for unredeemed gift cards. Therefore, choice C is the best answer.

Use the Following Information for Questions 34-35