Problem
A company sells $600,000 worth of gift cards during in fiscal 20X6. They receive cash and book a liability for the amount owed. The company expects that 30% of the gift cards sold in 20X6 will never be redeemed.
Assume the company uses the pro-rated method where they record breakage as gift cards are redeemed. If $16,800 in gift cards are redeemed in the first month of 20X6, how much revenue should the company recognize (normal revenue and breakage revenue) in that first month?