Included in Revenue in the Trial Balance is an amount of $3 million relating to sales...

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Included in Revenue in the Trial Balance is an amount of $3 million relating to sales made under a special promotion in the last month of the year. These goods were sold with an accompanying voucher equal to the selling price. Five years after the sale, these vouchers will be exchanged for goods of the customers choosing. The profit margin on these goods is expected to be 30% of selling price, and market research estimates that 50% of the vouchers will be redeemed. The present value (at the year end) of $1 at the time the vouchers will be exchanged can be taken as 60c. Required: What is the provision needed. Show also the Journal entry and thereby the effect on the Financial Statements. Included in Revenue in the Trial Balance is an amount of $3 million relating to sales made under a special promotion in the last month of the year. These goods were sold with an accompanying voucher equal to the selling price. Five years after the sale, these vouchers will be exchanged for goods of the customers choosing. The profit margin on these goods is expected to be 30% of selling price, and market research estimates that 50% of the vouchers will be redeemed. The present value (at the year end) of $1 at the time the vouchers will be exchanged can be taken as 60c. Required: What is the provision needed. Show also the Journal entry and thereby the effect on the Financial Statements.

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Answer Particulars Debit Credit Gift Card Expense 63000000 Gift Card Liability 6300... View the full answer