Review the opening feature of this chapter dealing with PopCap Games.
1. Assume that PopCap sells a $300 gift certificate to a customer, collecting the $300 cash in advance. Prepare the journal entry for the
(a) Collection of the cash for delivery of the gift certificate to the customer
(b) Revenue from the subsequent delivery of games when the gift certificate is used.
2. How can keeping no inventories help to improve PopCap’s profit margin?
3. PopCap understands that many companies carry inventories, and the owners are thinking of carrying an inventory of games on CDs. The owners desire your advice on the pros and cons of carrying such inventory. Provide at least one reason for and one reason against carrying inventories.