Use the Following Information for Questions

question 22

Multiple Choice

Use the following information for questions:
Anna's Day Spa sells $25,000 worth of gift certificates in November and December.25% of the gift certificates are redeemed in December prior to the December 31 year end.
-The required year end adjusting entry is:

• A)Dr.Revenues $6,250, Cr.Deferred gift card revenues $6,250
• B)Dr.Revenues $18,750, Cr.Deferred gift card revenues $18,750
• C)Dr.Deferred gift card revenues $6,250, Cr.Revenues $6,250
• D)Dr.Gift card revenues $18,750, Cr.Revenues $18,750

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Definitions:

Contribution Margin

The amount by which the sales of a product or service exceed the variable costs associated with its production, contributing towards covering fixed costs and generating profit.

Depreciation Expense

The allocated portion of the total cost of a company's physical assets that is expensed out on the income statement over a set period, reflecting the asset's consumption and wear and tear.

Fixed Costs

Costs that do not change with the level of production or sales, including expenses like rent, salaries, and insurance.

Variable Cost

Expenses that change in proportion with production output or sales, such as materials and labor.