What is the promotional expense that drew richards

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Drew-Richards iMusic is a regional music media reseller. As a promotion, it offered $5 cash rebates on specific CDs. Customers must mail in a proof-of-purchase seal from the package plus the cash register receipt to receive the rebate. Experience suggests that 70% of the rebates will be claimed. Twenty thousand of the CDs were sold in 2011. Total rebates to customers in 2011 were $22,000 and were recorded as promotional expense when paid. The fiscal year ends on December 31.

Required:

1. What is the promotional expense that Drew-Richards should report in its 2011 income statement?

2. What is the premium liability that Drew-Richards should report in its 2011 balance sheet?

3. Prepare the appropriate journal entry to record the contingency. 

Reference no: EM13994965

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