Texas Roadhouse opened a new restaurant in October. During its first three months of operation, the restaurant sold gift cards in various amounts totaling $3,200. The cards are redeemable for meals within one year of the purchase date. Gift cards totaling $936 were presented for redemption during the first three months of operation prior to year-end on December 31. The sales tax rate on restaurant sales is 4%, assessed at the time meals (not gift cards) are purchased. Texas Roadhouse will remit sales taxes in January. Required: 1.
1. Record (in summary form) the $2,500 in gift cards sold ( keeping in mind that, in actuality the firm would record each sale of a gift card individually ).
2. Record the $728 in gift cards redeemed, including the 4% sales tax assessed.
3. Determine the balance in the Unearned Revenue account ( remaining liability for gift cards ) Texas Roadhouse will report on the December 31 balance sheet.