Dolores’ Music Emplorium carries a wide variety of music promotion techniques- warranties and premiums- to attract customers. Musical instruments and sound equipment are sold in a one-year warranty for replacement of parts and labor. The estimated warranty cost, based on past experiences, is 2% on sales. The premium is offered on the recorded and sheet music. Customers receive coupon for each peso spent on recorded music or sheet music. Customers
Dolores’ Music Emplorium carries a wide variety of music promotion techniques- warranties and premiums- to attract customers. Musical instruments and sound equipment are sold in a one-year warranty for replacement of parts and labor. The estimated warranty cost, based on past experiences, is 2% on sales. The premium is offered on the recorded and sheet music. Customers receive coupon for each peso spent on recorded music or sheet music. Customers
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Dolores’ Music Emplorium carries a wide variety of music promotion techniques- warranties and premiums- to attract customers.
Musical instruments and sound equipment are sold in a one-year warranty for replacement of parts and labor. The estimated warranty cost, based on past experiences, is 2% on sales.
The premium is offered on the recorded and sheet music. Customers receive coupon for each peso spent on recorded music or sheet music. Customers may exchange 200 cupons and P20 for an Am/PM radio. Dolores pays P34 for each radio and estimates that 60% of the coupons will be redeemed.
Dolores sales for 2010 were P 57,600,000- P 43,200,000 from musical instrument and sound equipment and P 14,400,000 from recorded music and sheet music. Replacement parts and labor for warranty work totaled P 1,312,000. 52,000 AM/FM radio was purchased and 9,600,000 coupons were redeemed in 2020.
The accrual method is used by Dolores to account for the warranty and premium costs for financial reporting purposes. Beginning balances for premiums and warranties on January 1, 2020 were:
Inventory of AM/FM Radio P 319,600
Estimated Premium Liability 358,400
Estimated warranty Liability 1,088,000
Musical instruments and sound equipment are sold in a one-year warranty for replacement of parts and labor. The estimated warranty cost, based on past experiences, is 2% on sales.
The premium is offered on the recorded and sheet music. Customers receive coupon for each peso spent on recorded music or sheet music. Customers may exchange 200 cupons and P20 for an Am/PM radio. Dolores pays P34 for each radio and estimates that 60% of the coupons will be redeemed.
Dolores sales for 2010 were P 57,600,000- P 43,200,000 from musical instrument and sound equipment and P 14,400,000 from recorded music and sheet music. Replacement parts and labor for warranty work totaled P 1,312,000. 52,000 AM/FM radio was purchased and 9,600,000 coupons were redeemed in 2020.
The accrual method is used by Dolores to account for the warranty and premium costs for financial reporting purposes. Beginning balances for premiums and warranties on January 1, 2020 were:
Inventory of AM/FM Radio P 319,600
Estimated Premium Liability 358,400
Estimated warranty Liability 1,088,000
1. What is the amount of Warranty expense?
2. what is the amount of Premium expense?
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