1. A department store sells gift certificates that are redeemable for merchandis
ID: 2339207 • Letter: 1
Question
1. A department store sells gift certificates that are redeemable for merchandise. Each certificate expires three years after the date of issuance. The revenue from the gift certificates should be recognized: (a) Evenly over the three years from the date of issuance. (b) In the period in which the certificates are sold. (c) In the period in which the certificates expire. (d) In the period the certificates are redeemed or in the period in which they expire if they are allowed to lapse. 2. Beginning on January 1, 20X0, Lisbon Corporation began offering a three year warranty from the date of sale on any of its products sold from that date on. The warranty offer was expected to cost Lisbon 4% of its sales. Sales made under warranty in 200 amounted to $ 10,000,000 and 1 5% ofthe units sold were returned. The cost to repair or replace the units cost Lisbon S72,000. What amount of warranty expense should Lisbon report on its 20X0 income statement? (a) $133,333 (b) $400,000. (c) S 72,000. (d) S328,000. SFAS No. 43, Accounting for Compensated Absences, establishes the requirements for employers to accrue a liability for employees' compensation for future absences. The item that would require accrual under the provisions of this statement is: (a) Severance pay. (b) Postretirement benefits. (c) Vacation pay based on past service. (d) Long term disability pay 3.Explanation / Answer
1. Unearned revenue are liabilities and they are carried on balance sheet. Thus option would be Option D, that is when they are actully redeemed or when they are expired.
2. Option C, $ 72000 the cost incurred under warranty should be recorded
3. Option C, vacantion pay based on past service.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.