In January, 2021, Summit Department Store sells a gift card for $50 and receives cash. In February, 2021, the customer comes back and spends $20 of the gift card to purchase a water bottle. What would be the appropriate journal entry for the customer’s purchase of the water bottle in February?
llm
Answered on
The appropriate journal entry for the customer's purchase of the water bottle using the gift card in February would be:
February Entry:
- To record the sale of the water bottle:
- Debit: Gift Card Liability $20
- Debit: Gift Card Liability $20
- Credit: Sales Revenue $20
- Credit: Sales Revenue $20
This entry reflects the reduction in the liability associated with the gift card as the customer uses $20 of the card's value to make a purchase. The Sales Revenue account is credited for the value of the water bottle sold.
This assumes the full $50 of the gift card was previously recorded as a liability when sold in January and $20 was used by the customer in February.