Answer:
A. Dr Cash 5,200
Cr Deferred revenue 5,200
Dr Cash 884
Dr Deferred revenue 1,300
Cr Sales revenue 2,100
Cr Sales taxes payable 84
B. $3,900
C. Sales tax liability - CURRENT $84
Sales taxes payable (4% × $2,100) = $84
Sales tax liability - NON CURRENT $0
Liability gift certificates - CURRENT $2,860
Liability gift certificates – NON CURRENT $1,040
Explanation:
A. Preparation of the appropriate journal entries (in summary form) for the gift certificates sold during 2011
Dr Cash 5,200
Cr Deferred revenue 5,200
Dr Cash 884
($2,100 + $84 – $1,300)
Dr Deferred revenue 1,300
Cr Sales revenue 2,100
Cr Sales taxes payable 84
(4% × $2,100)
B. Calculation to Determine the liability for gift certificates to be reported on the December 31, 2018, balancesheet.
Liability for gift certificates=(5,200- 1,300)
Liability for gift certificates= $3,900
Therefore the liability for gift certificates to be reported on the December 31, 2018, balancesheet will be $3,900
C. Calculation for the appropriate amount for each classification (current or noncurrent) of the liabilities at December 31, 2018
Sales tax liability - CURRENT $84
(4% × $2,100=$84)
Sales tax liability - NON CURRENT $0
Liability gift certificates - CURRENT $2,860
Liability gift certificates – NON CURRENT $1,040
($5,200 × 20%=1,040 )
Calculation for Liability gift certificates at December 31
Estimated current liability$ 4,160
($ 5,200 × 80%)
Less Gift certificates redeemed(1,300)
Current liability at December 31 $2,860
