Regal Department Store sells gift certificates, redeemable for store merchandise, that expire one year after their issuance. Regal has the following information pertaining to its gift certificates sales and redemptions:
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|
Unredeemed at 12/31/05 |
$ 75,000 |
|
2006 sales |
250,000 |
|
2006 redemptions of prior year sales |
25,000 |
|
2006 redemptions of current year sales |
175,000 |
Regal’s experience indicates that 10% of gift certificates sold will not be redeemed. In its December 31, 2006 balance sheet, what amount should Regal report as unearned revenue?
- $125,000
- $112,500
- $100,000
- $ 50,000