In Lizzie Shoes’ experience, gift cards that have not been redeemed within 12 months are not likely to be redeemed. Lizzie Shoes sold gift cards for $18,000 during August of 2016. $4,000 of cards were redeemed in September of 2016, $3,000 in October, $2,500 in November, and $2,000 in December of 2016. In 2017 an additional $1,000 of cards were redeemed in January and $500 in February.

How much gift card revenue associated with the August 2016 gift card sales would Lizzie get to recognize in 2016 and 2017?

2016 revenue = $11,500

2017 revenue = $6500

Explanation:

Given the following ;

Gift card sold out in August 2016:

Total = $18,000

Gift cards Redeemed in 2016:

September = $4000

October = $3000

November = $2500

December = $2000

Gift cards redeemed in 2017:

January = $1000

February = $500

Total Recognized gift card revenue in 2016:

$(4000 + 3000 + 2500 + 2000) = $11,500

Total Recognized gift card revenue in 2017:

Total gift cards rolled out - total recognized in 2016:

$18,000 - $11,500 = $6,500

Though only $1500 was redeemed in 2017,however gift cards not redeemed within 12 months are not likely to be redeemed. The 12 month period ends in July 2017. Hence it will be recognized in 2017.