Problem
Pina Music Emporium Carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. Pina uses two sales promotions 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 record and sheet mudic. Customers receive a coupon for each dollar spent on recorded music and sheet exchange 200 coupons and $20 for an MP3 player. Pina pays $31 for each player and estimates that 50% of the 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 equipment and $1,000,000 from recorded music and sheet music. Replacement parts and labor for warranty worked totaled $154,100 during 2017. A total of 6,470 players used in the premium program were purchased during the year and there wewre 1,108,000 coupons redeemed in 2017.
The balance in the accounts related to warranties and premiums 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 shown on the 2017 financial statements for the following.
a) Warranty Expenses _______________________
B) Warranty Liability ________________________