Modern Music gives its customers coupons which are redeemable for a poster plus a Hens and Chicks DVD. One coupon is issued for each dollar of sales. On presentation of 100 coupons and

$5.00 cash, the customer receives the poster and DVD. Modern estimates that 80% of the coupons will be presented for redemption. Sales for Year One were $1,050,000, and 510,000 coupons were redeemed. Sales for Year Two were $1,260,000, and 1,275,000 coupons were redeemed. Modern bought 30,000 posters at $2.00 each, and 30,000 DVDs at $5.50 each.

Instructions

Prepare the following entries for both years, assuming all the coupons expected to be redeemed from Year One were redeemed by the end of Year Two.

Entry Year One Year Two

To record coupons redeemed

To record estimated liability