Exhibit 9-3 John Company includes three coupons in each package of cookies it sells. In exchange for 20 coupons, a customer will receive a cookie sheet. John estimates that 30% of the coupons will be redeemed. In 2016, John sold 4,000,000 boxes of cookies and purchased 150,000 Cookie sheets at $2.50 each. During the year, 970,000 coupons were redeemed.5. Refer to Exhibit 9-3. What amount should John record as premium expense for 2016? a. $121,250 b. $450,000 c. $375,000 d. $500,000 6. Refer to Exhibit 9-3. What amount should John report as estimated premium claims outstanding at December 31, 2016? a. $121,250 b. $328,750 c. $450,000 d. $500,000
Exhibit 9-3 John Company includes three coupons in each package of cookies it sells. In exchange for 20 coupons, a customer will receive a cookie sheet. John estimates that 30% of the coupons will be redeemed. In 2016, John sold 4,000,000 boxes of cookies and purchased 150,000 Cookie sheets at $2.50 each. During the year, 970,000 coupons were redeemed.5. Refer to Exhibit 9-3. What amount should John record as premium expense for 2016? a. $121,250 b. $450,000 c. $375,000 d. $500,000 6. Refer to Exhibit 9-3. What amount should John report as estimated premium claims outstanding at December 31, 2016? a. $121,250 b. $328,750 c. $450,000 d. $500,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exhibit 9-3
John Company includes three coupons in each package of cookies it sells. In exchange for 20 coupons, a customer will receive a cookie sheet. John estimates that 30% of the coupons will be redeemed. In 2016, John sold 4,000,000 boxes of cookies and purchased 150,000 Cookie sheets at $2.50 each. During the year, 970,000 coupons were redeemed.
5. Refer to Exhibit 9-3. What amount should John record as premium expense for 2016?
a.
$121,250
b.
$450,000
c.
$375,000
d.
$500,000
6. Refer to Exhibit 9-3. What amount should John report as estimated premium claims outstanding at December 31, 2016?
a.
$121,250
b.
$328,750
c.
$450,000
d.
$500,000
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