In 2021, SUGA Company sold 485,000 boxes of cereals under a new sales promotional program. Each box contains one coupon, which entitles the customer to a premium that costs the company ₱75. Five coupons plus a remittance of ₱20 must be presented by the customer to receive a premium. SUGA estimated that 85% of the coupons will be redeemed. Actual premiums redeemed were 5,000 units. Additional information disclosed that ₱10 per premium is incurred for storage and distribution. a. Compute for the liability for the unredeemed coupons. b. Compute for the premium expense for the year.
In 2021, SUGA Company sold 485,000 boxes of cereals under a new sales promotional program. Each box contains one coupon, which entitles the customer to a premium that costs the company ₱75. Five coupons plus a remittance of ₱20 must be presented by the customer to receive a premium. SUGA estimated that 85% of the coupons will be redeemed. Actual premiums redeemed were 5,000 units. Additional information disclosed that ₱10 per premium is incurred for storage and distribution. a. Compute for the liability for the unredeemed coupons. b. Compute for the premium expense for the year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In 2021, SUGA Company sold 485,000 boxes of cereals under a new sales promotional program. Each box contains one coupon, which entitles the customer to a premium that costs the company ₱75. Five coupons plus a remittance of ₱20 must be presented by the customer to receive a premium. SUGA estimated that 85% of the coupons will be redeemed. Actual premiums redeemed were 5,000 units. Additional information disclosed that ₱10 per premium is incurred for storage and distribution.
a. Compute for the liability for the unredeemed coupons.
b. Compute for the premium expense for the year.
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