Other-Liabilities.pdf - Module 6 Other Long-term Liabilities Members RICAMONTE ANGELES BURGUILLOS DAYDAY DE GUZMAN UMALI VILLORENTE Module 6 Other

Other-Liabilities.pdf - Module 6 Other Long-term...

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Other Long-term Liabilities Module 6 Members RICAMONTE ANGELES BURGUILLOS DAYDAY DE GUZMAN UMALI VILLORENTE
Module 6: Other Long-term Liabilities Motivation
Module 6: Other Long-term Liabilities Introduction of the topic Discuss about Provisions & Contingencies Identify Non-financial Liabilities Summary 1 3 2 4 Today's Agenda
PREMIUMS any additional cost charged on top of an asset's usual cost total cost to buy an option
1 An entity manufactures a certain product and sold 100,000 boxes for 5,000,000. Each box contains two coupons. A toy is offered to customers on the return of 10 coupons plus a remittance of 50. The entity pays 200 per toy in its 20,000 units of toys purchased, and 10 for handling and shipping. The entity estimated that 60% of the coupons will be redeemed. Requirement: Prepare journal entries to record the sales, premium purchases and redemption, and year end adjustments Illustration
1 An entity manufactures a certain product and sold 100,000 boxes for 5,000,000. Each box contains two coupons. A toy is offered to customers on the return of 10 coupons plus a remittance of 50. The entity pays 200 per toy in its 20,000 units of toys purchased, and 10 for handling and shipping. The entity estimated that 60% of the coupons will be redeemed. Illustration Journal entries To record sales To record purchase premium Cash 5,000,000 Sales 5,000,000 Premiums 4,200,000 Cash 4,200,000 (20,000 x 210)
1 An entity manufactures a certain product and sold 100,000 boxes for 5,000,000. Each box contains two coupons. A toy is offered to customers on the return of 10 coupons plus a remittance of 50. The entity pays 200 per toy in its 20,000 units of toys purchased, and 10 for handling and shipping. The entity estimated that 60% of the coupons will be redeemed. Illustration Journal entries To record provision of premium at the end of reporting period. Premium expense 1,920,000 Premium liability 1,920,000 100,000 x 2 x 0.60 ÷ 10= 12,000 toys Net cost= 210-50= 160 (12,000 x 160)
Assume that 40,000 coupons was redeemed during the year. Determine the outstanding premiums liability to be reported at the end of the year 1 Premium expense 640,000 Premiums 640,000 Premium expense 1,280,000 Premiums Liability 1,280,000
Cash Rebate Program variation of a premium offers which has become common place the estimated amount should be recognized both as an expense and an estimated liability in the period of sale
Illustration An entity offered 500 cash rebate on a particular model of TV set. The customers must present a rebate coupon enclosed in every package sold plus the official receipt. Past experience indicates that 40% of the coupons will be redeemed. During the current year, the entity sold 4,000 TV sets and total payments to customers amounted to 450,000.
An entity offered 500 cash rebate on a particular model of TV set. The customers must present a rebate coupon enclosed in every package sold plus the official receipt. Past experience indicates that 40% of the coupons will be redeemed.

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