Majik Corporation offers a variety of electronic instruments, tooling equipment, technical reference books, and audio training manuals. Majik uses warranties and premiums as sales promotion techniques to attract customers. Electronic instruments and tooling equipment are sold with a 1-year warranty for replacement of parts and labor. Estimated warranty cost, based on past experience, is 1.5% of sales. The premium offered on technical reference books and audio training manuals allows customers receive an MP3 player in exchange 250 for coupons and $25. Customers receive 1 coupon for each dollar spent on technical reference books and audio training manuals. Each MP3 player costs $35 and Makjik estimates 65% of the coupons given to customers will be redeemed. Majik's total 2020 sales totaled $8,250,000 with $6,500,000 from electronic instruments and tooling equipment and $1,750,000 from technical reference books and audio training manuals. Warranty replacement parts and labor costs totaled $124,000 during 2020 ($64,000 of the work is related to pre-2020 sales). A total of 6,500 players used in the premium program were purchased during the year and there were 1,400,000 coupons redeemed in 2020. The balances in the accounts related to warranties and premiums on January 1, 2020, were as shown below. Premium inventory Premium liability Warranty liability Requirements Determine the amounts that will be shown on the 2020 financial statements for the following. Warranty expense $ 42,500 47,400 65,000 Warranty liability Premium expense Premium inventory Premium liability
Majik Corporation offers a variety of electronic instruments, tooling equipment, technical reference books, and audio training manuals. Majik uses warranties and premiums as sales promotion techniques to attract customers. Electronic instruments and tooling equipment are sold with a 1-year warranty for replacement of parts and labor. Estimated warranty cost, based on past experience, is 1.5% of sales. The premium offered on technical reference books and audio training manuals allows customers receive an MP3 player in exchange 250 for coupons and $25. Customers receive 1 coupon for each dollar spent on technical reference books and audio training manuals. Each MP3 player costs $35 and Makjik estimates 65% of the coupons given to customers will be redeemed. Majik's total 2020 sales totaled $8,250,000 with $6,500,000 from electronic instruments and tooling equipment and $1,750,000 from technical reference books and audio training manuals. Warranty replacement parts and labor costs totaled $124,000 during 2020 ($64,000 of the work is related to pre-2020 sales). A total of 6,500 players used in the premium program were purchased during the year and there were 1,400,000 coupons redeemed in 2020. The balances in the accounts related to warranties and premiums on January 1, 2020, were as shown below. Premium inventory Premium liability Warranty liability Requirements Determine the amounts that will be shown on the 2020 financial statements for the following. Warranty expense $ 42,500 47,400 65,000 Warranty liability Premium expense Premium inventory Premium liability
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Majik Corporation offers a variety of electronic instruments, tooling equipment, technical reference books, and audio
training manuals. Majik uses warranties and premiums as sales promotion techniques to attract customers. Electronic
instruments and tooling equipment are sold with a 1-year warranty for replacement of parts and labor. Estimated
warranty cost, based on past experience, is 1.5% of sales. The premium offered on technical reference books and audio
training manuals allows customers receive an MP3 player in exchange 250 for coupons and $25. Customers receive 1
coupon for each dollar spent on technical reference books and audio training manuals. Each MP3 player costs $35 and
Makjik estimates 65% of the coupons given to customers will be redeemed.
Majik's total 2020 sales totaled $8,250,000 with $6,500,000 from electronic instruments and tooling equipment and
$1,750,000 from technical reference books and audio training manuals. Warranty replacement parts and labor costs
totaled $124,000 during 2020 ($64,000 of the work is related to pre-2020 sales). A total of 6,500 players used in the
premium program were purchased during the year and there were 1,400,000 coupons redeemed in 2020. The balances
in the accounts related to warranties and premiums on January 1, 2020, were as shown below.
Premium inventory
Premium liability
Warranty liability
Requirements
Determine the amounts that will be shown on the 2020 financial statements for the following.
Warranty expense
$ 42,500
47,400
65,000
Warranty liability
Premium expense
Premium inventory
Premium liability
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