P13.12 (LO 2) (Warranties and Premiums) Garison Music Emporium carries a wide variety ofmusical instruments, sound reproduction equipment, recorded music, and sheet music. Garison usestwo sales promotion techniques-warranties and premiums-to attract customers.Musical instruments and sound equipment are sold with a 1-year warranty for replacement of partsand 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 dollarspent on recorded music or sheet music. Customers may exchange 200 coupons and $20 for an MP3player. Garison pays $32 for each player and estimates that 60% of the coupons given to customers willbe redeemed.Garison's total sales for 2022 were $7,200,000-$5,700,000 from musical instruments and soundreproduction equipment and $1,500,000 from recorded music and sheet music. Replacement parts andlabor for warranty work totaled $94,000 during 2022. A total of 6,500 players used in the premiumprogram were purchased during the year, and there were 1,200,000 coupons redeemed in 2022.The balances in the accounts related to warranties and premiums on January 1, 2022, were as shownbelow.Inventory of Premiums $ 37,600Premium Liability44,800Warranty Liability136,000InstructionsGarison Music Emporium is preparing its financial statements for the year ended December 31, 2022.Determine the amounts that will be shown on the 2022 financial statements for the following.a. Warranty Expense.b. Warranty Liability.c. Premium Expense. d. Inventory of Premiums.e. Premium Liability.

Sales revenue: The amount earned by selling goods or services is known as sales revenue. This is the…

P13.12 (LO 2) (Warranties and Premiums) Garison Music Emporium carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. Garison 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 2% 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 $20 for an MP3 player. Garison pays $32 for each player and estimates that 60% of the coupons given to customers will be redeemed. Garison's total sales for 2022 were $7,200,000-$5,700,00o from musical instruments and sound reproduction equipment and $1,500,000 from recorded music and sheet music. Replacement parts and labor for warranty work totaled $94,000 during 2022. A total of 6,500 players used in the premium program were purchased during the year, and there were 1,200,000 coupons redeemed in 2022. The balances in the accounts related to warranties and premiums on January 1, 2022, were as shown below. Inventory of Premiums $ 37,600 Premium Liability 44,800 Warranty Liability 136,000 Instructions Garison Music Emporium is preparing its financial statements for the year ended December 31, 2022. Determine the amounts that will be shown on the 2022 financial statements for the following. a. Warranty Expense. b. Warranty Liability. c. Premium Expense.

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