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25 August, 03:18

Apple Inc. is the number one online music retailer through its iTunes music store. Apple sells iTunes gift cards in $15, $25, and $50 increments. Assume Apple sells $19.8 million in iTunes gift cards in November, and customers redeem $12.8 million of the gift cards in December. Record the advance collection of $20 million for iTunes gift card.

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  1. 25 August, 03:45
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    cash 20,000,000 debit

    unearned revenue 20,000,000 credit

    Explanation:

    Record the advance collection of $20 million for iTunes gift card.

    When a gift card is sold, Apple Inc assume the obligation of latter provide iTunes in the near future or do cash reimbursement therefore; this isn't revenue. It is a liability. Apple will generate revenue when the gift ard are redeem not at sale.
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