Ashley Stores, Inc., sells gift cards for use at its stores. The following data pertains to 2019,
Question:
Ashley Stores, Inc., sells gift cards for use at its stores. The following data pertains to 2019, 2020, and 2021, the company's first three years of operation:
As of December 31, 2019, Ashley estimates that 1.0% of its gift cards will never be redeemed. As of December 31, 2020, Ashley has revised its estimate, and now believes 1.5% of all gift cards, including those issued in 2019, will not be redeemed. As of December 31, 2021, its estimate remains at 1.5%. Ashley is not required to remit unused gift card amounts to the state.
Required:
1. What amount of breakage revenue should Ashley recognize in 2019, 2020, and 2021?
2. What amount of gift card liability should be reported on Ashley's balance sheet at December 31, 2019, 2020, and 2021?
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Requirement 1 The following analysis shows the amount of breakage revenue Ashley recognizes in each ...View the full answer
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
