Musify carries a wide variety of music promotion techniques-warranties and premiums- to attract customers. Musical instruments and sound equipment are sold on a one-year warranty for the 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 peso spent on recorded music or sheet music Customers may exchange 200 coupons and P20 for an AM/FM radio. Musify pays P34 for each radio and estimates that 60% of the coupons given to customers will be redeemed Musity total sales for 2015 were P7.200,000-P5,400,000 from musical instrument and sound reproduction equipment and P1,800.000 from recorded and sheet music Replacement parts and labor for warranty work totaled P164,000 during 2015 A total of 6,500 AM/FM radio used in the premium program were purchased during the year and there were 1,200,000 coupons redeemed in 2015 The accrual method is used by Musify to account for the warranty and premium costs for financial reporting purposes. The balance in the accounts related to warranties and premiums is on January 1, 2015, were as shown below Inventory of Premium AM/FM radio P 39,950 Estimated Premium Claims Outstanding 44.800 Estimated Liability from Warranties 136,000 REQUIRED: Based on the above and the result of your audit, determine the amounts that will be shown on the 2015 financial statements for the following: Warranty Expense Estimated Liability for Warranties Premium Expense Inventory of AM/FM Radio Estimated Liability for Premiums
Musify carries a wide variety of music promotion techniques-warranties and premiums- to attract customers.
Musical instruments and sound equipment are sold on a one-year warranty for the 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 peso spent on recorded music or sheet music Customers may exchange 200 coupons and P20 for an AM/FM radio.
Musify pays P34 for each radio and estimates that 60% of the coupons given to customers will be redeemed Musity total sales for 2015 were P7.200,000-P5,400,000 from musical instrument and sound reproduction equipment and
P1,800.000 from recorded and sheet music Replacement parts and labor for warranty work totaled P164,000 during 2015 A total of 6,500 AM/FM radio used in the premium program were purchased during the year and there were 1,200,000 coupons redeemed in 2015 The accrual method is used by Musify to account for the warranty and premium costs for financial reporting purposes. The balance
in the accounts related to warranties and premiums is on January 1, 2015, were as shown below
Inventory of Premium AM/FM radio P 39,950
Estimated Premium Claims Outstanding 44.800 Estimated Liability from Warranties 136,000
REQUIRED: Based on the above and the result of your audit, determine the amounts that will be shown on the 2015 financial statements for the following:
Warranty Expense
Estimated Liability for Warranties
Premium Expense
Inventory of AM/FM Radio
Estimated Liability for Premiums
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