Meadville Industries Sells Gift Certificates That Are Redeemable in Merchandise

Multiple Choice

Meadville Industries sells gift certificates that are redeemable in merchandise. During 2017, Meadville sold gift certificates for $88,000. Merchandise with the total price of $52,000 was redeemed during the year. For Meadville, the cost of the merchandise sold was $32,000. Meadville sold gift certificates for the first time in 2017. Assuming that Meadville uses the perpetual inventory method, the journal entry recording the redemption of the gift certificates during 2017 will include:

A) a credit to Cost of Goods Sold for $32,000
B) a debit to Unearned Revenue for $88,000
C) a credit to Sales for $52,000
D) a credit to Unearned Revenue for $52,000