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Prepare journal entries for escargot gift card transaction

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Reference no: EM131756384

Question: Escargot Inc. is a 5-star restaurant in Cincinnati. The restaurant sells 500 gift cards during January 2017. Each gift card has a face value of $300. The gift cards never expire, although based on industry experience, Escargot expects that 12% of the balances will never be redeemed. During February 2017, $45,000 of gift cards are redeemed, and in March 2017 another $80,000 is redeemed.

Required: 1. Prepare journal entries for Escargot's gift card transactions for January through March.

2. Assume that at the end of March, due to the popularity of the restaurant, Escargot reduces its estimate of the amount of gift cards that will go unused to 8%. During April, gift cards worth $10,000 are used. Prepare any necessary journal entries.

CHART OF ACCOUNTS
Escargot Inc.
General Ledger


 ASSETS
111 Cash
121 Accounts Receivable
141 Inventory
152 Prepaid Insurance
181 Equipment
198 Accumulated Depreciation


LIABILITIES
211 Accounts Payable
231 Salaries Payable
250 Unearned Revenue
261 Income Taxes Payable


EQUITY
311 Common Stock
331 Retained Earnings


REVENUE
411 Sales Revenue


EXPENSES
500 Cost of Goods Sold
511 Insurance Expense
512 Utilities Expense
521 Salaries Expense
532 Bad Debt Expense
540 Interest Expense
541 Depreciation Expense
559 Miscellaneous Expenses
910 Income Tax Expense

Reference no: EM131756384

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