Answered: SM Department Store sells gift…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter9: Current Liabilities And Contingent Obligations

Section: Chapter Questions

Problem 21E: Cash Rebates On January 1, 2020, Fro-Yo Inc. began offering customers a cash rebate of 5.00 if the...

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SM Department Store sells gift certificates, redeemable for store merchandise that expires one year after their issuance. SM has the following information pertaining to its gift certificates sales and redemptions: Unearned at December 31, 2020 - ₱600,000; 2021 sales - ₱2,000,000; 2021 redemptions of prior-years sales -₱200,000; 2021 redemptions of current-year sales-₱1,400,000.

In its December 31, 2021 statement of financial position, what amount should SM report as unearned revenue?

A. ₱ 800,000

B. ₱ 1,000,000

C. ₱ 400,000

D. ₱ 600,000

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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