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Mozart Music Co. began operations in December of 2018. The company sold gift certificates during December in various amounts totaling $1,600. The gift certificates are redeemable for merchandise within three years of the purchase date. However, experience within the industry predicts that 90% of gift certificates will be redeemed within one year. Certificates totaling $500 were presented for redemption during 2018 as part of merchandise purchases having a total retail price of $750.
Required:
1. Determine the liability for gift certificates to be reported in the December 31, 2018, balance sheet.
2. What is the appropriate classification (current or noncurrent) of the liabilities at December 31, 2018? Show calculations.
Average Worker's Pay
The mean salary or wage earned by employees in a specific job, occupation, or region, often used as a benchmark for assessing economic health and wage fairness.
Walsh-Healy Public Contracts Act
A law that requires minimum wage, overtime pay, and safety and health standards for workers on federal contracts.
Prevailing Local Wage Rates
The average wage paid to workers in a specific area or industry, often used as a benchmark for setting wages.
General Contractors
Companies or individuals tasked with the overall responsibility for the execution, supervision, and completion of construction projects, managing subcontractors and materials.
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