Reference no: EM132869091

Question - You have recently been hired as controller of Monnex Enterprises, a plastics 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 plastic 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, 2020. Below are selected issues that you are working to resolve. Monnex Enterprises reports under international financial reporting standards (IFRS).

1. The stores offer a promotion to its customers. Customers receive a coupon with each purchase of the company's plastic products. A free jogging pouch is awarded to the customer when the customer presents 10 coupons. The jogging pouch cost the company $1.25 each. At the start of the year the company had 1,800 pouches in inventory. The company issued 6,000 coupons throughout the year. The company expects that 75% of the coupons will be redeemed. During the year 1700 coupons were redeemed. Record all journal entries related to coupons. Assume the expense approach is used.

2. As part of its operations, Monnex sells equipment. The equipment includes a warranty. The company sold 300 pieces of equipment for an average sales price of $800. Included in the sales price are warranties that are estimated to be worth $180 for each piece of equipment. The warranty is for two years form date of purchase. The company expects total actual warranty costs to be $68,000. Actual costs incurred were $32,000 in year one. Warranty revenue is recognized based on costs incurred as a percentage of total expected costs.

Required - Show all journal entries for the sales and the warranty using the revenue approach.