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JB Music carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. To attract customers, JB uses two (2) promotion techniques – premiums and warranties. The premium is offered on the recorded and sheet music. Customers receive a coupon for each peso spent on recorded music and sheet music. Customers may exchange 200 coupons and P20 for a CD player. JB pays P34 for each CD player and estimates that 80% of the coupons given to customers will be redeemed. A total of 7,400 CD players used in the premium program were purchased during the year, and there were 1,250,000 coupons redeemed in 20x1. Musical instruments and sound reproduction equipment are sold with a one-year warranty for replacement of parts and labor. The estimated warranty cost, based on previous experience, is 4% of sales. Replacement parts and labor for warranty work totaled P180,000 during 20x1. JB's sales for 20x1 totaled P7,200,000 – P5,400,000 from musical instruments and sound reproduction equipment and P1,800,000 from recorded music and sheet music. JB uses the accrual method 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, 20x1, were as shown below: Inventory of premium CD players Estimated premium claims outstanding Estimated liability from warranties P39,950 44,800 136,000 Based on the preceding information, determine the amounts that will be shown on the December 31, 20x1 financial statements for the following: 16. Warranty expense for 20x1, 17. Estimated liability from warranties 18. Premium expense for 20x1 19. Inventory of premium CD players 20. Estimated premium claims outstanding

JB Music carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. To attract customers, JB uses two (2) promotion techniques – premiums and warranties. The premium is offered on the recorded and sheet music. Customers receive a coupon for each peso spent on recorded music and sheet music. Customers may exchange 200 coupons and P20 for a CD player. JB pays P34 for each CD player and estimates that 80% of the coupons given to customers will be redeemed. A total of 7,400 CD players used in the premium program were purchased during the year, and there were 1,250,000 coupons redeemed in 20x1. Musical instruments and sound reproduction equipment are sold with a one-year warranty for replacement of parts and labor. The estimated warranty cost, based on previous experience, is 4% of sales. Replacement parts and labor for warranty work totaled P180,000 during 20x1. JB's sales for 20x1 totaled P7,200,000 – P5,400,000 from musical instruments and sound reproduction equipment and P1,800,000 from recorded music and sheet music. JB uses the accrual method 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, 20x1, were as shown below: Inventory of premium CD players Estimated premium claims outstanding Estimated liability from warranties P39,950 44,800 136,000 Based on the preceding information, determine the amounts that will be shown on the December 31, 20x1 financial statements for the following: 16. Warranty expense for 20x1, 17. Estimated liability from warranties 18. Premium expense for 20x1 19. Inventory of premium CD players 20. Estimated premium claims outstanding

Intermediate Accounting: Reporting And Analysis
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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Case 7: JB MUSIC JB Music carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. To attract customers, JB uses two (2) promotion techniques – premiums and warranties. The premium is offered on the recorded and sheet music. Customers receive a coupon for each peso spent on recorded music and sheet music. Customers may exchange 200 coupons and P20 for a CD player. JB pays P34 for each CD player and estimates that 80% of the coupons given to customers will be redeemed. A total of 7,400 CD players used in the premium program were purchased during the year, and there were 1,250,000 coupons redeemed in 20x1. Musical instruments and sound reproduction equipment are sold with a one-year warranty for replacement of parts and labor. The estimated warranty cost, based on previous experience, is 4% of sales. Replacement parts and labor for warranty work totaled P180,000 during 20x1. JB's sales for 20x1 totaled P7,200,000 – P5,400,000 from musical instruments and sound reproduction equipment and P1,800,000 from recorded music and sheet music. JB uses the accrual method 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, 20x1, were as shown below: Inventory of premium CD players Estimated premium claims outstanding Estimated liability from warranties P39,950 44,800 136,000 Based on the preceding information, determine the amounts that will be shown on the December 31, 20x1 financial statements for the following: 16. Warranty expense for 20x1 , 17. Estimated liability from warranties 18. Premium expense for 20x1 19. Inventory of premium CD players , 20. Estimated premium claims outstanding
Transcribed Image Text:Case 7: JB MUSIC JB Music carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. To attract customers, JB uses two (2) promotion techniques – premiums and warranties. The premium is offered on the recorded and sheet music. Customers receive a coupon for each peso spent on recorded music and sheet music. Customers may exchange 200 coupons and P20 for a CD player. JB pays P34 for each CD player and estimates that 80% of the coupons given to customers will be redeemed. A total of 7,400 CD players used in the premium program were purchased during the year, and there were 1,250,000 coupons redeemed in 20x1. Musical instruments and sound reproduction equipment are sold with a one-year warranty for replacement of parts and labor. The estimated warranty cost, based on previous experience, is 4% of sales. Replacement parts and labor for warranty work totaled P180,000 during 20x1. JB's sales for 20x1 totaled P7,200,000 – P5,400,000 from musical instruments and sound reproduction equipment and P1,800,000 from recorded music and sheet music. JB uses the accrual method 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, 20x1, were as shown below: Inventory of premium CD players Estimated premium claims outstanding Estimated liability from warranties P39,950 44,800 136,000 Based on the preceding information, determine the amounts that will be shown on the December 31, 20x1 financial statements for the following: 16. Warranty expense for 20x1 , 17. Estimated liability from warranties 18. Premium expense for 20x1 19. Inventory of premium CD players , 20. Estimated premium claims outstanding
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