WestJet Corporation issued a $1,000 gift certificate.What journal entry will WestJet Corporation record?

Question

Quizplus · Accepted Answer

When WestJet Corporation issues a $1,000 gift certificate, it is receiving cash upfront for a product or service that it has not yet provided. Therefore, the transaction should be recorded as a liability on the balance sheet, specifically as deferred revenue. This means that cash should be debited (increased) and deferred revenue should be credited (also increased) to reflect the receipt of the cash upfront and the obligation to provide the product or service at a later date. Choice B is the correct journal entry that reflects this transaction.

WestJet Corporation Issued a $1,000 Gift Certificate