Question

Unearned revenue, which represents the company's obligation to honor gift cards previously issued to customers, totaled $6,800 at the beginning of the year and $10,100 at the end of the year. customers purchased gift cards amounting to $55,000 during the year. what was the amount of gift cards redeemed by customers during the year?

Answer 1

The correct answer is that there were $51,700 work of gift cards redeemed during the year.

In order to determine the correct answer you need to start with the total balance of the unearned revenue account, which is $6,800. To the starting balance you need to add the amount of gift cards purchased throughout the year, which is $55,000. This total is $61,800. The last step is to subtract the ending balance of the unearned revenue from the total ($61,800 - 10,100), which equals $51,700. $51,700 is the amount of gift cards redeemed during the year.