Ashley Stores- Inc.- sells gift cards for use at its stores. The following data pertain to 20X1- 20X2- and 20X3- the companys first three years of operation:
Ashley Stores, Inc., sells gift cards for use at its stores. The following data pertain to 20X1, 20X2, and 20X3, the company’s first three years of operation:
20×1 20×2 20×3
gift card sales 30,000 45,000 50,000
gift card usage 12,000 28,000 37,000
As of December 31, 20X1, Ashley estimates that 1.0% of its gift cards will never be redeemed. As of December 31, 20X2, Ashley has revised its estimate, and now believes 1.5% of all gift cards, including those issued in 20X1, will not be redeemed. As of December 31, 20X3, its estimate remains at 1.5%. Ashley is not required to remit unused gift card amounts to the state.
- What amount of breakage revenue should Ashley recognize in 20X1, 20X2, and 20X3?
- What amount of gift card liability should be reported on Ashley’s balance sheet at December 31, 20X1, 20X2, and 20X3?
(For all requirements, do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)