Pina musical instruments, sound reproduction equipment, recorded music and labor sheet music, pina uses two sales promotion techniques warranties and premiums to attract customers.
Musical instruments and sound equipment are sold with a one year warranty for replacement of parts and labor, The estimated warranty cost, based on past experience, is 2% of sales.
The premium is offered on the recorded and sheet music. Customers receive a coupon for each dollar spent on recorded music or sheet. Customers may exchange 200 coupons and $20 for an MP3 player. Pina pays $31 for each player and estimates 50% of the coupons given to customers will be redeemed.
Pina's total sales for 2017 were $7,152,000-$6,152,000 from musical instruments and sound reproduction equipment and $1,000,000 from recorded music and sheet music replacement parts and labor for warranty work totaled $154,100 during 2017. A total of 6,470 players uses in the program were purchased during the year and there were 1,108,000 coupons redeemed in 2017.
The balances in the accounts related to warranties and premium on January 1, 2017, were as shown below.
Inventory of Premiums $39,720
Premium Liability 42,510
Warranty Liability 125,600
Pina Music Emporium is preparing its financial statements for the year ended December 31, 2017. Determine the amounts that will be shown on the 2017 financial statements for the following
A) Warranty Expenses $____________________________
B) Warranty Liability $______________________________
C) Premium expenses $ _____________________________
D) Inventory of Premiums $________________________________________
E) Premium Liability $________________________________________