Meadville Industries Sells Gift Certificates That Are Redeemable in Merchandise

Essay

Meadville Industries sells gift certificates that are redeemable in merchandise. During 2009, 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 2009. Assuming that Meadville uses the perpetual inventory method, the journal entry recording the redemption of the gift certificates during 2009 will include:
a. a credit to Cost of Goods Sold for $32,000
b. a debit to Deferred Revenue for $88,000
c. a credit to Sales for $52,000
d. a credit to Deferred Revenue for $52,000