B 9 O 1 2 53 54 65 66 67 168 169 170 171 172 173 174 Exercise 5 up to 3 points Majik Corporation offers a variety of electronic instruments, tooling equipment, technical reference books, and audio training manuals. Majik uses warranties and premiums as sales prometion techniques to attract customers. Electronic instruments and tooling equipment are sold with a 1-year warranty for replacement of parts and labor. Estimated warranty cost, based on past experience, is 1.5% of sales. The premium offered on technical reference books and audio training manuals allows customers receive an MP3 player in exchange 250 for coupons and $25. Customers receive 1 coupon for each dollar spent on technical reference books and audio training manuals. Each MP3 player costs $35 and Makjik estimates 65% of the coupons given to customers will be redeemed. Majik's total 2020 sales totaled $8,250,000 with $6,500,000 from electronic instruments and tooling equipment and $1,750,000 from technical reference books and audio training manuals. Warranty replacement parts and labor costs totaled $124,000 during 2020 ($64,000 of the work is related to pre-2020 sales). A total of 6,500 players used in the premium program were purchased during the year and there were 1,400,000 coupons redeemed in 2020. The balances in the accounts related to warranties and premiums on January 1, 2020, were as shown below. 175 176 Premium inventory 177 Premium liability 178 Warranty liability S 42,500 47,400 65,000 179 180 Requirements 181 Determine the amounts that will be shown on the 2020 financial statements for the following. 182 183 Warranty expense 184 185 Warranty liability 186 187 Premium expense 188 189 Premium inventory 190 191 Premium liability 192 193 194 Show your calculations in the work area to the right. Failure to show your work will result in no credit for this exercise. 195 196