Answer:
The question lacks monetary values, number of gift cards given to customers but Gift cards are rewards to customers by an entity for purchasing more than a predetermined number of goods or a certain product. Gift cards are designed to strengthen customer loyalty. Gift card are a liability as per Revenue standard until redeemed or converted by the customer. When dealing with Gift cards there must be a standalone price per gift card either estimated or taken from previous data. Gift card rewards are usually associated with Revenue but should be separated from revenue as they are deferred revenue (Liability) and can only be earned revenue on redemption date. These kinds of rewards are calculated on a cumulative basis over the years and there must be an estimated number of gift cards to be redeemed. When new gift cards are rewarded the liability increases when redeemed liabilities are decreased and income increased.
Example
01 Jan 2020 sold 20 books for $10,200 included in the price is points per book and estimated standalone price $10. At the 5 points were redeemed.
solution
01 Jan 2020 debit Bank $10200, Credit Revenue (books) $10000, Credit Unearned revenue $200
31 Dec 2020 Debit Unearned revenue $50, Credit Revenue $50
Balance sheet
liabilities
Unearned revenue(200-50) = $150
Explanation:
