During 2020, Gray Company sold 500,000 boxes of cake mix under a new sales promotional program. Each box contained one coupon, which entitled the customer to a baking pan upon remittance of P40. The entity paid P50 per pan and P5 for handling and shipping. The entity estimated that 80% of the coupons will be redeemed, even though only 300,000 coupons had been processed during 2020. 2a. What amount should be reported as premium expense for 2020? a. P 2,000,000 b. P 4,500,000 c. P 6,000,000 d. P 7,500,000 2b. What amount should be reported as liability for unredeemed coupons on December 31, 2020? a. 1,000,000 b. 1,500,000 c. 3,000,000 d. 5,000,000
During 2020, Gray Company sold 500,000 boxes of cake mix under a new sales promotional program. Each box contained one coupon, which entitled the customer to a baking pan upon remittance of P40. The entity paid P50 per pan and P5 for handling and shipping. The entity estimated that 80% of the coupons will be redeemed, even though only 300,000 coupons had been processed during 2020. 2a. What amount should be reported as premium expense for 2020? a. P 2,000,000 b. P 4,500,000 c. P 6,000,000 d. P 7,500,000 2b. What amount should be reported as liability for unredeemed coupons on December 31, 2020? a. 1,000,000 b. 1,500,000 c. 3,000,000 d. 5,000,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
During 2020, Gray Company sold 500,000 boxes of cake mix under a new sales promotional program. Each box contained one coupon, which entitled the customer to a baking pan upon remittance of P40. The entity paid P50 per pan and P5 for handling and shipping.
The entity estimated that 80% of the coupons will be redeemed, even though only 300,000 coupons had been processed during 2020.
2a. What amount should be reported as premium expense for 2020?
a. P 2,000,000
b. P 4,500,000
c. P 6,000,000
d. P 7,500,000
2b. What amount should be reported as liability for unredeemed coupons on December 31, 2020? a. 1,000,000
b. 1,500,000
c. 3,000,000
d. 5,000,000
Transcribed Image Text:2. During 2020, Gray Company sold 500,000 boxes of cake mix under a new sales promotional program.
Each box contained one coupon, which entitled the customer to a baking pan upon remittance of P40.
The entity paid P50 per pan and P5 for handling and shipping.
The entity estimated that 80% of the coupons will be redeemed, even though only 300,000 coupons had
been processed during 2020.
2a. What amount should be reported as premium expense for 2020?
a. P2,000,000
b. P4,500,000
c. P6,000,000
d. P 7,500,000
2b. What amount should be reported as liability for unredeemed coupons on December 31, 2020?
a. 1,000,000
b. 1,500,000
c. 3,000,000
d. 5,000,000
Transcribed Image Text:2. During 2020, Gray Company sold 500,000 boxes of cake mix under a new sales promotional program.
Each box contained one coupon, which entitled the customer to a baking pan upon remittance of P40.
The entity paid P50 per pan and P5 for handling and shipping.
The entity estimated that 80% of the coupons will be redeemed, even though only 300,000 coupons had
been processed during 2020.
2a. What amount should be reported as premium expense for 2020?
a. P2,000,000
b. P4,500,000
c. P6,000,000
d. P 7,500,000
2b. What amount should be reported as liability for unredeemed coupons on December 31, 2020?
a. 1,000,000
b. 1,500,000
c. 3,000,000
d. 5,000,000
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