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.
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 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
|First Period||Coupons Expense||22,880|
|Estimated Coupons Liability||22,880|
|to record estimation of obligation|
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fromChapter 8 / Lesson 5
Learn the definition and examples of current liabilities, and why they are important. Discover the difference between current assets, and current liabilities.