The following facts relate to gift cards sold by Spirit Shop Company during 2010. Spirit Shop's fiscal year ends on December 31.

(1.) In October, 2011 sold $5,700 of gift cards, and redeemed $500 of those gift cards.

(2.) In November, 2011, sold $7,000 of gift cards, and redeemed $1,300 of October gift cards and $600 of November gift cards.

(3.) In December, 2011, sold $7,000 of gift cards, and redeemed $800 of October gift cards, $5,000 of November gift cards, and $500 of December gift cards.

(4.) Spirit Shop views a gift card to be "broken" (with a remote probability of redemption) two months after the end of the month in which it is sold. Thus, an unredeemed gift card sold at any time during July would be viewed as broken as of September 30.

Required:

1. Prepare all journal entries appropriate to be recorded only during the month of December, 2010 relevant to gift card sales, gift card redemptions, and gift card breakage.

2. Determine the balance of the unearned revenue liability to be reported in the December 31, 2010, balance sheet. Show the relevant T-account information to support your answer.