Re: Sam Goody gift card disaster
Reminds me of an accounting test bank problem:
1) CircuitTown commenced a gift card program in January 2013 and sold $11,150 of gift cards in January, $19,950 in February, and $17,600 in March of 2013 before discontinuing further gift card sales. During 2013, gift card redemptions were $6,900 for the January gift cards sold, $6,950 for the February cards, and $4,550 for the March cards. CircuitTown considers gift cards to be “broken” (not redeemable) 10 months after sale. (Assume that gift-card sales occur halfway through each month on average.)
a) How much revenue will CircuitTown recognize with respect to March gift card sales during 2013?
b) What liability for unearned revenue associated with gift card sales would CircuitTown show as of December 31, 2013?
This problem cracked me up not just because of the obvious Circuit City reference but also because at least in California it's illegal to have gift cards expire.