Irwin Music Shop gives its customers coupons redeemable for a poster plus a Bo Diddley CD. One...
Question:
Irwin Music Shop gives its customers coupons redeemable for a poster plus a Bo Diddley CD. One coupon is issued for each dollar of sales. On the surrender of 100 coupons and $6.00 cash, the poster and CD are given to the customer. It is estimated that 80% of the coupons will be presented for redemption. Sales for the first period were $715,000, and the coupons redeemed totaled 429,000. Sales for the second period were $855,000, and the coupons redeemed totaled 747,000. Irwin Music Shop bought 20,000 posters at $3.0/poster and 20,000 CDs at $7.0/CD.
Required:
Prepare the entries for the two periods, assuming all the coupons expected to be redeemed from the first period were redeemed by the end of the second period.
Current Liability:
Current Liability are obligations which will be settled within one year from the balance sheet date. Coupons are use as a marketing strategy to encourage customers the buy an entities products. The estimated coupons obligation is an example of current liability.
Answer and Explanation: 1
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View this answer| Account | Debit | Credit | |
| First Period | Coupons Expense | 22,880 | |
| Estimated Coupons Liability | 22,880 | ||
| to record estimation of obligation | |||
| Estimated Coupons... |
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