Sales Promotions

On January 1, 20Y5, Seagrave Appliances offered a $150 mail-in rebate to any customer who purchases a TV or appliance with a list price of $1,000 or more. The rebate offer expires January 31 and checks will be mailed to customers starting February 1. During January, Seagrave Appliances issued 800 rebates to its customers.

If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases, cash outflows, and the income statement effects that decrease gross profit as negative amounts.

a. Illustrate the effects of the liability for the mail-in rebates on the accounts and financial statements as of January 31. Assume all rebates will be redeemed.

b. Illustrate the effects of the payment of $115,000 of mail-in rebates on February 5 on the accounts and financial statements.

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