Master College Concepts with Expert Q&A and Solutions
In January, Tongo, Inc., a branding consultant, had the following transactions. Indicate the accounts, amounts, and direction of the effects on the accounting equation under the accrual basis. a. (Sample) Received $10,600 cash for consulting services rendered in January.b. Issued common stock to investors for $15,500 cash.c. Purchased $17,600 of equipment, paying 25 percent in cash and owing the rest on a note due in two years.d. Received $7,750 cash for consulting services to be performed in February.e. Bought and received $1,100 of supplies on account.f. Received utility bill for January for $2,070, due February 15.g. Consulted for customers in January for fees totaling $16,500, due in February.h. Received $13,500 cash for consulting services rendered in December.i. Paid $550 toward supplies purchased in (e).
Bavarian Bar and Grill opened for business in November 2021. During its first two months of operation, the restaurant sold gift cards in various amounts totaling $5,200, mostly as Christmas presents. They are redeemable for meals within two years of the purchase date, although experience within the industry indicates that 80% of gift cards are redeemed within one year. Gift cards totaling $1,300 were presented for redemption during 2021 for meals having a total price of $2,100. The sales tax rate on restaurant sales is 4%, assessed at the time meals (not gift cards) are purchased. Sales taxes will be remitted in January.Required:a. Prepare the appropriate journal entries (in summary form) for the gift certificates sold during 2011 (keeping in mind that, in actuality, each sale of a gift certificate or a meal would be recorded individually). b. Determine the liability for gift certificates to be reported on the December 31, 2011, balance sheet. c. What is the appropriate classification (current or noncurrent) of the liabilities at December 31, 2011? Why?