M5-24. Reporting Unearned Revenue
Target sells gift cards that can be used at any of the company's Target stores or on Target.com. Target
encodes information on the card's magnetic strip about the card's value and the store where it was
purchased. Target gift cards do not have expiration dates.
a. When does Target record revenue from the gift card?
i. Two years after the date of the sale, which is when the gift card expires.
ii. When the gift card is sold.
LO3
Target Corporation
(TGT)
Aomewor
MBC
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Module 5 Revenues, Receivables, and Operating Expenses
iii. When the customer uses the gift card. at which point, Target also records an allowance for
estimated product returns.
iv. 90 days after the date the customer uses the gift card, which is when the product return period
expires.
b. How will Target's balance sheet reflect the gift card when it is initially sold?
As sales revenue.
As a liability: unearned revenue.
Cambridge Business Publishers
i. As an asset: cash and cash equivalents.
ii. As an asset: allowance for product sales.
iii.
iv.