At what amount should warranty expense and premium expense be shown in theDecember 31, 2019 profit or loss statement of Jackson Music Emporium?a. P108,00 and P56,950, respectivelyb. P108,00 and P75,600, respectivelyc. P136,00 and P204,000, respectivelyd. P164,00 and P120,400, respectivelyAt what amount should the estimated liability from warranties be shown in theDecember 31, 2019 statement of financial position of Jackson Music Emporium? a.P80,000b. P108,000c. P136,000d. P164,000At what amount should the inventory of premium cassette players be shown in theDecember 31, 2019 financial statements of Jackson Music Emporium? a. P39,950b. P56,950c. P204,000d. P221,000At what amount should the estimated premium claims outstanding be shown in theDecember 31, 2019 financial statements of Jackson Music Emporium? a. P36,400b. P44,000c. P75,660d. P84,000 Jackson Music Emporium Carries a wide variety of musical instruments, sound reproductionequipment, recorded music, and sheet music. Jackson uses two sales promotion techniquesnamely (a) warranties and (b) premiums to attract customers.Musical instruments and sound equipment are sold with a one-year warranty forreplacement of parts and labor. The estimated warranty cost, based on past experience, is2% of sales.The premium is offered on the recorded and sheet music. Customers receive a coupon foreach peso spent on recorded music or sheet music. Customers may exchange 20 couponsand P20 for a cassette player. Jackson pays P34 for each cassette player and estimates that60% of the coupons given to the customers will be redeemed.Jackson's total sales for 2019 were P7,200,000; P5,400,000 from musical instrumentand sound reproduction equipment and P1,800,000 from recorded music and sheetmusic. Replacement parts and labor for warranty work totaled P164,000 during 2019. Atotal of 6,500 cassette players used in the premium program were purchased during theyear and there were 1,200,000 coupons redeemed in 2019.The accrual method is used by Jackson to account for the warranty and premium costs forfinancial reporting purposes. The balances in the accounts related to warranties andpremiums on January 1, 2019 are shown below:Inventory of Premium Cassette PlayersP39,950Estimated Premium Claims Outstanding44,800Estimated Liability from Warranties136,000

Sale Value of musical instrument 54,00,000 Estimated warranty cost % 2% Warranty…

Answered: O and P75,600, respectively O and…

O and P75,600, respectively O and P204,000, respectively O and P120,400, respectively unt should the estimated liability from wa 2019 statement of financial position of Jac 00 00 00

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter9: Current Liabilities And Contingent Obligations

Section: Chapter Questions

Problem 10RE

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Question

At what amount should warranty expense and premium expense be shown in the
December 31, 2019 profit or loss statement of Jackson Music Emporium?
a. P108,00 and P56,950, respectively
b. P108,00 and P75,600, respectively
c. P136,00 and P204,000, respectively
d. P164,00 and P120,400, respectively
At what amount should the estimated liability from warranties be shown in the
December 31, 2019 statement of financial position of Jackson Music Emporium? a.
P80,000
b. P108,000
c. P136,000
d. P164,000
At what amount should the inventory of premium cassette players be shown in the
December 31, 2019 financial statements of Jackson Music Emporium? a. P39,950
b. P56,950
c. P204,000
d. P221,000
At what amount should the estimated premium claims outstanding be shown in the
December 31, 2019 financial statements of Jackson Music Emporium? a. P36,400
b. P44,000
c. P75,660
d. P84,000

Jackson Music Emporium Carries a wide variety of musical instruments, sound reproduction
equipment, recorded music, and sheet music. Jackson uses two sales promotion techniques
namely (a) warranties and (b) 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 recorded and sheet music. Customers receive a coupon for
each peso spent on recorded music or sheet music. Customers may exchange 20 coupons
and P20 for a cassette player. Jackson pays P34 for each cassette player and estimates that
60% of the coupons given to the customers will be redeemed.
Jackson's total sales for 2019 were P7,200,000; P5,400,000 from musical instrument
and sound reproduction equipment and P1,800,000 from recorded music and sheet
music. Replacement parts and labor for warranty work totaled P164,000 during 2019. A
total of 6,500 cassette players used in the premium program were purchased during the
year and there were 1,200,000 coupons redeemed in 2019.
The accrual method is used by Jackson to account for the warranty and premium costs for
financial reporting purposes. The balances in the accounts related to warranties and
premiums on January 1, 2019 are shown below:
Inventory of Premium Cassette Players
P39,950
Estimated Premium Claims Outstanding
44,800
Estimated Liability from Warranties
136,000

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