An entity offers a wide variety of music promotion techniques - warranties and premiums - to...

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An entity offers a wide variety of music promotion techniques - warranties and premiums - to attract customers. Musical instrument and sound equipment are sold in a two-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 100 coupons and P10 for a record player. The company pays P17 for each record player and estimates that 60% of the coupons given to customers will be redeemed. The company's total sales for 2020 were P28,800,000 (P21,600,000 from musical instrument and sound reproduction equipment and P7,200,000 from recorded music and sheet music. Replacement parts and labor for warranty work totaled P656,000 during 2020. A total of 26,000 record players used in the premium program were purchased during the year and there were 4,800,000 coupons redeemed in 2020. The accrual method is used by the company to account for the warranty and premium costs for financial reporting purposes. The balance in the accounts related to warranties and premiums on January 1, 2020 were as follows: Inventory of record players 159,800 Estimated premium claims outstanding 179,200 Estimated liability from warranties 544,000 Determine the amounts that will be reported in the 2020 financial statements for: (1) Estimated liability from warranties [Select] (2) Estimated liability for premiums [Select] An entity offers a wide variety of music promotion techniques - warranties and premiums - to attract customers. Musical instrument and sound equipment are sold in a two-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 100 coupons and P10 for a record player. The company pays P17 for each record player and estimates that 60% of the coupons given to customers will be redeemed. The company's total sales for 2020 were P28,800,000 (P21,600,000 from musical instrument and sound reproduction equipment and P7,200,000 from recorded music and sheet music. Replacement parts and labor for warranty work totaled P656,000 during 2020. A total of 26,000 record players used in the premium program were purchased during the year and there were 4,800,000 coupons redeemed in 2020. The accrual method is used by the company to account for the warranty and premium costs for financial reporting purposes. The balance in the accounts related to warranties and premiums on January 1, 2020 were as follows: Inventory of record players 159,800 Estimated premium claims outstanding 179,200 Estimated liability from warranties 544,000 Determine the amounts that will be reported in the 2020 financial statements for: (1) Estimated liability from warranties [Select] (2) Estimated liability for premiums [Select]

Answer rating: 100% (QA)

aEstimated liability from Warranty Opening Balance 544000 Warranty Expense2... View the full answer