How would the sale of gift cards affect the current ratio

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Question 1. Uselessstuff.com sells various electronic items online. The company also sells gift cards that can be used to purchase items from the Uselessstuff.com website. These cards cannot be redeemed for cash. At the beginning of 2015, Uselessstuff.com had a balance of $75,000 in its "gift card liability" account. During 2015, it sold $150,000 in gift cards and $60,000 worth of gift cards were redeemed for merchandise that cost Uselessstuff.com $35,000. It is estimated that 2% of the "gift card liability" at the end of 2015 won't be redeemed by customers.

a. Prepare the journal entries to record to sale of gift cards and redemption of gift cards in 2015

b. Record the yearend adjusting entry to record the gift cards that won't be redeemed.

c. What is the 2015 yearend balance in the "gift card liability account after the above adjusting entry?

d. How would the sale of gift cards affect the current ratio?

Question 2. Explain and discuss two specific examples of how a company could manage earnings in the current year through specific accounting policies, choices or estimations.

Reference no: EM132592258

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