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

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?

A) Debit Deferred Revenue, $50 credit Sales Revenue, $50.

B) Debit Deferred Revenue, $20 credit Sales Revenue, $20.

C) Debit Sales Revenue, $20 credit Deferred Revenue, $20.

D) No journal entry is necessary.

Answer: B

At times, businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided. These customer advances represent:

A) Liabilities until the product or service is provided.

B) A component of stockholders' equity.

C) Long-term assets until the product or service is provided.

D) Revenue upon receipt of the advance payment.

Answer: A

The sale of gift cards by a company is a direct example of:

A) Deferred revenues.

B) Sales tax payable.

C) Current portion of long-term debt.

D) Contingencies.

Answer: A