Question

Apple Inc. is the number one online music retailer through its iTunes music store. Apple sells iTunes gift cards in $15, $25, and $50 increments. Assume Apple sells $20.0 million in iTunes gift cards in November, and customers redeem $13.0 million of the gift cards in December.
8.
value:
10.00 points
Required information
Required:
1. & 2. Record the necessary entries in the Journal Entry Worksheet below. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5.5 should be entered as 5,500,000).)
9-
3. What is the ending balance in the Deferred revenue account? (Enter your answer in dollars, not in millions. (i.e. 5.5 should be entered as 5,500,000).)

Answer 1

Answer:

1. & 2. Nov 30

Dr Cash $20.0 million

Cr Deferred Revenue $20.0 million

(To record the cash received for gift cards)

Dec 31

Dr Deferred Revenue $13.0 million

Cr Sales Revenue $13.0 million

3. $7,000,000

Explanation:

1. & 2. Preparation of the necessary journal entries

APPLE INC.

Journal Entries

Nov 30

Dr Cash $20.0 million

Cr Deferred Revenue $20.0 million

(To record the cash received for gift cards)

Dec 31

Dr Deferred Revenue $13.0 million

Cr Sales Revenue $13.0 million

(To record the redemption of gift cards)

3) Calculation to determine the ending balance in the Deferred revenue account

Ending Balance in Deferred revenue = $20.0 million - $13.0 million

Ending Balance in Deferred revenue= $7,000,000

Therefore ending balance in deferred revenue account is $7,000,000