$1.)$ Premiums.

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 $$6\mathrm{.}00$ cash, the poster and CD are given to the customer. It is estimated that $80\%$ of the coupons will be presented for redemption. Sales for the first period were $$700,000,$ and the coupons redeemed totaled $420,000.$ Sales for the second period were $$840,000,$ and the coupons redeemed totaled $750,000.$ Irwin Music Shop bought $20,000$ posters at $$2\mathrm{.}50/$poster and $20,000$ CDs at $$7\mathrm{.}50/$CD$.$

Instructions

Prepare the following entries for the first periods, assuming all the coupons expected to be redeemed from the first period were redeemed by the end of the second period.

Entry Period $1$

$($a$)$ To record coupons redeemed

$$

$($b$)$ To record estimated liability

$$

$2.)$ Warranties

Merritt Equipment Company sells computers for $$1,500$ each and also gives each customer a $2-$year warranty that requires the company to perform periodic services and to replace defective parts. In $2025,$ the company sold $1,200$ computers. Based on experience, the company has estimated the total $2-$year warranty costs as $$40$ for parts and $$60$ for labor per unit. $($Assume sales all occur at December $31,2025.)$

In $2026,$ Merritt incurred actual warranty costs relative to $2025$ computer sales of $$16,000$ for parts and $$24,000$ for labor.

Instructions

$($a$)$ Record the entries to reflect the above transactions $($accrual method$)$ for $2025$ and $2026.$

$($b$)$ What balance will be reported as a current liability in the $2025$ balance sheet with regard to these transactions?