29 Jun Question MML uses two sales
Question
MML uses two sales promotion techniques – warranties and premium
warranties are sold with a one year warranty and is %2 of sales
premiums are receive a coupon for each dollar spent and exchange 200 coupons plus $20 for a CD player which cost the company $34 each MML estimates that 60^ of the coupons given to customers will be redeemed
Total sales are $7.2 million $5.4 millon from warranties and $1.8 million from premium warranties cost $164000 during 2011 and 6300 CD players were used and $1.2 million coupons redeemed
The accrual method is used by MML the balances on Jan 1, 2011 were
Inventory of premium CD players $39960
Estimated Premium Liability $44800
EStimated Liabiltiy for warranty $136.00
MML is preparing its financial stm for the year ended Dec,eber 31, 2011
I need to determine the amounts that will be shown on the 2011 financial statement for the following
A.
1. Warranty Expense
2. Estimated liability for warranties
3. Premium expense
4. Inventory of Premium CD players
5. Estimated Premium liability
B Also assume that MML auditor determined that both the one year warranty and the coupods for the CD players were in fact revenue arranagments with mutl deliverable that should be accounted fro under the revenue approach Explain how this would change the way in which these two programs were accounting for in part A
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