Monty Music Emporium carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. Monty uses two sales promotion techniques-warranties and premiums-to attract customers. Musical instruments and sound equipment are sold with a 1-year warranty for replacement of parts and labor. The estimated warranty cost, based on past experience, is 1% 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 music. Customers may exchange 200 coupons and $10 for an MP3 player. Monty pays $21 for each player and estimates that 70% of the coupons given to customers will be redeemed. Monty's total sales for 2025 were $6,886,000; $5,610,000 from musical instruments and sound reproduction equipment and $1,276,000 from recorded music and sheet music. Replacement parts and labor for warranty work totaled $90,500 during 2025 ($41,000 of the work is related to pre-2025 sales). A total of 5,910 players used in the premium program were purchased during the year and there were 1,266,000 coupons redeemed in 2025. The balances in the accounts related to warranties and premiums on January 1, 2025, were as shown below. Premium Inventory Premium Liability Warranty Liability $38,440 44,610 54,300 Monty Music Emporium is preparing its financial statements for the year ended December 31, 2025. Determine the amounts that will be shown on the 2025 financial statements for the following.
Monty Music Emporium carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. Monty uses two sales promotion techniques-warranties and premiums-to attract customers. Musical instruments and sound equipment are sold with a 1-year warranty for replacement of parts and labor. The estimated warranty cost, based on past experience, is 1% 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 music. Customers may exchange 200 coupons and $10 for an MP3 player. Monty pays $21 for each player and estimates that 70% of the coupons given to customers will be redeemed. Monty's total sales for 2025 were $6,886,000; $5,610,000 from musical instruments and sound reproduction equipment and $1,276,000 from recorded music and sheet music. Replacement parts and labor for warranty work totaled $90,500 during 2025 ($41,000 of the work is related to pre-2025 sales). A total of 5,910 players used in the premium program were purchased during the year and there were 1,266,000 coupons redeemed in 2025. The balances in the accounts related to warranties and premiums on January 1, 2025, were as shown below. Premium Inventory Premium Liability Warranty Liability $38,440 44,610 54,300 Monty Music Emporium is preparing its financial statements for the year ended December 31, 2025. Determine the amounts that will be shown on the 2025 financial statements for the following.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Monty Music Emporium carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet
music. Monty uses two sales promotion techniques-warranties and premiums-to attract customers.
Musical instruments and sound equipment are sold with a 1-year warranty for replacement of parts and labor. The estimated warranty
cost, based on past experience, is 1% 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 music. Customers may exchange 200 coupons and $10 for an MP3 player. Monty pays $21 for each player and estimates
that 70% of the coupons given to customers will be redeemed.
Monty's total sales for 2025 were $6,886,000; $5,610,000 from musical instruments and sound reproduction equipment and
$1,276,000 from recorded music and sheet music. Replacement parts and labor for warranty work totaled $90,500 during 2025
($41,000 of the work is related to pre-2025 sales). A total of 5,910 players used in the premium program were purchased during the
year and there were 1,266,000 coupons redeemed in 2025.
The balances in the accounts related to warranties and premiums on January 1, 2025, were as shown below.
Premium Inventory
Premium Liability
Warranty Liability
$ 38,440
44,610
54,300
Monty Music Emporium is preparing its financial statements for the year ended December 31, 2025. Determine the amounts that will
be shown on the 2025 financial statements for the following.
Transcribed Image Text:Monty Music Emporium is preparing its financial statements for the year ended December 31, 2025. Determine the amounts that will
be shown on the 2025 financial statements for the following.
(a)
(b) Warranty Liability
(c)
(d)
Warranty Expense
(e)
Premium Expense
Premium Inventory
Premium Liability
$
$
$
$
56100
19900
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