Bull'sEye sells gift cards redeemable for Bull'sEye products either in-store or online. During 2018, Bull'sEye sold $2,000,000 of gift cards, and $1,800,000 of the gift cards were redeemed for products. As of December 31, 2018, $150,000 of the remaining gift cards had passed the date at which Bull'sEye concludes that the cards will never be redeemed. How much gift card revenue should Bull'sEye recognize in 2018?

Question

Quizplus · Accepted Answer

Sale of a gift card created deferred revenue, as it is a prepayment by a customer for goods or services to be delivered at a future date. Revenue is recognized when goods or services are delivered or when the likelihood of redemption is remote. In this case, $1,800,000 were redeemed and another $150,000 were viewed as expired, yielding total revenue of $1,950,000.

Bull'sEye Sells Gift Cards Redeemable for Bull'sEye Products Either In-Store