Problem 13-12 Riverbed Music Emporium carries a wide variety of musical instruments sound reproduction equipment recorded music and sheet music. Riverbed uses two sales promotion techniqueswarranties and premiumsto attract customers.
Problem 13-12 Riverbed Music Emporium carries a wide variety of musical instruments sound reproduction equipment recorded music and sheet music. Riverbed uses two sales promotion techniqueswarranties and premiumsto 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 dollar spent on recorded music or sheet music. Customers may exchange 200 coupons and $20 for an MP3 player. Riverbed pays $32 for each player and estimates that 50% of the coupons given to customers will be redeemed. Riverbeds total sales for 2017 were $7 320 000$6 178 000 from musical instruments and sound reproduction equipment and $1 142 000 from recorded music and sheet music. Replacement parts and labor for warranty work totaled $170 900 during 2017. A total of 6 880 players used in the premium program were purchased during the year and there were 1 148 000 coupons redeemed in 2017. The balances in the accounts related to warranties and premiums on January 1 2017 were as shown below. Inventory of Premiums $ 36 750 Premium Liability 40 960 Warranty Liability 148 400 Riverbed Music Emporium is preparing its financial statements for the year ended December 31 2017. Determine the amounts that will be shown on the 2017 financial statements for the following. (Round answers to 0 decimal places e.g. 125.) (a) Warranty Expense $ (b) Warranty Liability $ (c) Premium Expense $ (d) Inventory of Premiums $ (e) Premium Liability
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