MMA Bhd (MMA) is currently promoting its new product, a handheld vacuum cleaner. To achieve its targeted sales, MMA offers its customer a redemption of a portable video player in exchange for RM20 with every purchase of the handheld vacuum cleaner. The promotions began on 1 July 2020 and ends on 31 January 2021. For the purpose of redemptions, MMA purchased 6,400 units of portable video player on June 2020 with a cost price of RM45 per unit by cash. The company also managed to sell 8,000 units of the handheld vacuum cleaner during the financial year of 31 December 2020. The sales price of the handheld vacuum cleaner is RM550 per unit. It is estimated that 80% of the customers who have bought the handheld vacuum cleaner will make the redemptions. However, as at 31 December 2020, only 70% of the customers had redeemed.

Additional information:

1. All sales were made by cash.

2. The financial year end for MMA is on 31 December.

3. Assume that each unit of handheld vacuum cleaner was sold to one customer.

REQUIRED:

(a) Prepare the journal entries that should be recorded in the year 2020.

(b) Determine the following balances and how they should be reported by MMA Bhd as at 31 December 2020:

i. Inventory of premiums

ii. Premium liability