Peterson Photoshop sold $2,800 in gift cards on a special promotion on October 1

Question

Peterson Photoshop sold $2,800 in gift cards on a special promotion on October 15, 2013, and sold $4,200 in gift cards on another special promotion on November 15, 2013. Of the cards sold in October, $280 were redeemed in October, $700 in November, and $840 in December. Of the cards sold in November, $420 were redeemed in November and $980 were redeemed in December. Peterson views the probability of redemption of a gift card as remote if the card has not been redeemed within two months. At 12/31/2013, Peterson would show an unearned revenue account for the gift cards with a balance of:

Explanation / Answer

4200 - 420 - 980 = 2800

All the revenue is recognized in October.

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