Unearned Revenue,which represents the company's obligation to honor gift cards previously issued to customers,totaled $5,500 at the beginning of the year and $7,500 at the end of the year.Customers purchased gift cards amounting to $42,000 during the year.What was the amount of gift cards redeemed by customers during the year?

Question

Quizplus · Accepted Answer

The increase in unearned revenue from $5,500 to $7,500 represents the amount of gift cards that were sold but not yet redeemed. Therefore, gift cards redeemed during the year can be calculated as follows:

Gift cards sold = $42,000
Add: Unearned Revenue at the beginning of the year = $5,500
Less: Unearned Revenue at the end of the year = $7,500
Gift cards redeemed during the year = $40,000 (Option A)

Unearned Revenue,which Represents the Company's Obligation to Honor Gift Cards