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redeemed, even processed during the current year. 1. What amount should be reported as premium expense for current year? a. 6,000,000 b. 7,500,000 c. 4,500,000 d. 2,000,000 2. What amount should be reported as liability for unredeemed coupons at year-end? a. 1,000,000 b. 1,500,000 C 3.000.000

redeemed, even processed during the current year. 1. What amount should be reported as premium expense for current year? a. 6,000,000 b. 7,500,000 c. 4,500,000 d. 2,000,000 2. What amount should be reported as liability for unredeemed coupons at year-end? a. 1,000,000 b. 1,500,000 C 3.000.000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 2-17 (AICPA Adapted) During the current year, Day 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 the current year. 1. What amount should be reported as premium expense for current year? a. 6,000,000 b. 7,500,000 c. 4,500,000 d. 2,000,000 2. What amount should be reported as liability for unredeemed coupons at year-end? a. 1,000,000 b. 1,500,000 c. 3,000,000 d. 5,000,000 Problem 2-18 (IAA) Clam Company offers customers a pottery cereal bowl if they send in three boxtops from its products and P10. The entity estimated that 60% of the boxtops will be redeemed. During the current year, the entity sold 675,000 boxes and customers redeemed 330,000 boxtops receiving 110,000 bowls. The cost of each bowl was P25. 1. What amount should be reported as premium expense for current year? a. 2,025,000 b. 6,075,000 c. 4,550,000 d. 1,650,000 2. What amount should be reported as liability for outstanding premiums at year-end? a. 250,000 b. 375,000 c. 625,000 d. 875,000 58 Pro Cha laur A to 10 c Dist only Box Nur Cou 1. 2. 3. 4.
Transcribed Image Text:Problem 2-17 (AICPA Adapted) During the current year, Day 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 the current year. 1. What amount should be reported as premium expense for current year? a. 6,000,000 b. 7,500,000 c. 4,500,000 d. 2,000,000 2. What amount should be reported as liability for unredeemed coupons at year-end? a. 1,000,000 b. 1,500,000 c. 3,000,000 d. 5,000,000 Problem 2-18 (IAA) Clam Company offers customers a pottery cereal bowl if they send in three boxtops from its products and P10. The entity estimated that 60% of the boxtops will be redeemed. During the current year, the entity sold 675,000 boxes and customers redeemed 330,000 boxtops receiving 110,000 bowls. The cost of each bowl was P25. 1. What amount should be reported as premium expense for current year? a. 2,025,000 b. 6,075,000 c. 4,550,000 d. 1,650,000 2. What amount should be reported as liability for outstanding premiums at year-end? a. 250,000 b. 375,000 c. 625,000 d. 875,000 58 Pro Cha laur A to 10 c Dist only Box Nur Cou 1. 2. 3. 4.
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