You have recently been hired as controller of Benjamin Enterprises, a manufacturing company. In addition to its manufacturing facility, the company operates an exploration site where it is has been successful in discovering oil that is used in its manufacturing division. The company also has a chain of stores that sell the manufacturing products. The previous controller left suddenly due to illness. Your first task is to prepare the liability section of the financial statements for the year ended December 31, 2022. Below are selected issues that you are working to resolve. Benjamin Enterprises reports under international financial reporting standards (IFRS).

Required:

For each of the following items, answer the related questions. Please show all calculations.

1. The stores offer a promotion to its customers. Customers receive a coupon with each purchase of the companys plastic products. A free Travel Mug is awarded to the customer when the customer presents 10 coupons. The travel mug cost the company $1.50 each. At the start of the year the company had purchased 1,600 of the mugs. The company issued 5,000 coupons throughout the year. The company expects that 70% of the coupons will be redeemed. During the year 1500 coupons were redeemed. Record all journal entries related to coupons. Assume the expense approach is used.

2. As part of its operations, Benjamin sells equipment. The equipment includes a warranty. The company sold 400 pieces of equipment for an average sales price of $600. Included in the sales price are warranties that are estimated to be worth $150 for each piece of equipment. The warranty is for two years from date of purchase. The company expects total actual warranty costs to be $57,000. Actual costs incurred were $29,000 in year one. Warranty revenue is recognized based on costs incurred as a percentage of total expected costs.

Show all journal entries for the sales and the warranty using the revenue approach. (Round to the nearest dollar)

3. Benjamin exploration site cost $1,800,000 at the beginning of the year. The site will be operated for 10 years at which time Bull must return the site to its original state. It is estimated that this will cost $750,000 at the end of the sites useful life. Assume that Bull uses private entity GAAP.

a) Prepare the journal entries for the acquisition of the site and the asset retirement obligation. The effective interest rate is 6%.

b) Prepare the journal entries for December 31, 2022.