The following are three independent situations. 1. Hairston Stamp Company records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Hairston’s past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Hairston’s liability for stamp redemptions was $13,000,000 at December 31, 2019. Additional information for 2020 is as follows. Stamp service revenue from stamps sold to licensees0000 $9,500,000 Cost of redemptions (stamps sold prior to 1/1/20)0000 6,000,000 c. If all the stamps sold in 2020 were presented for redemption in 2021, the redemption cost would be $5,200,000. What amount should Hairston report as a liability for stamp redemptions at December 31, 2020? 2. In packages of its products, Burnitz Inc. includes coupons that may be presented at retail stores to obtain discounts on other Burnitz products. Retailers are reimbursed for the face amount of coupons redeemed plus 10% of that amount for handling costs. Burnitz honors requests for coupon redemption by retailers up to 3 months after the consumer expiration date. Burnitz estimates that 60% of all coupons issued will ultimately be redeemed. Information relating to coupons issued by Burnitz during 2020 is as follows. Consumer expiration date 12/31/20 Total face amount of coupons issued $800,000 Total payments to retailers as of 12/31/20 330,000 What amount should Burnitz report as a liability for unredeemed coupons at December 31, 2020? 3. Roland Company sold 700,000 boxes of pie mix under a new sales promotional program. Each box contains one coupon, which submitted with $4.00, entitles the customer to a baking pan. Roland pays $6.00 per pan and $0.50 for handling and shipping. Roland estimates that 70% of the coupons will be redeemed, even though only 250,000 coupons had been processed during 2020. What amount should Roland report as a liability for unredeemed coupons at December 31, 2020?
The following are three independent situations.
1. Hairston Stamp Company records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Hairston’s past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Hairston’s liability for stamp redemptions was $13,000,000 at December 31, 2019. Additional information for 2020 is as follows.
| Stamp service revenue from stamps sold to licensees0000 |
$9,500,000
|
|
| Cost of redemptions (stamps sold prior to 1/1/20)0000 |
6,000,000
|
c. If all the stamps sold in 2020 were presented for redemption in 2021, the redemption cost would be $5,200,000. What amount should Hairston report as a liability for stamp redemptions at December 31, 2020?
2. In packages of its products, Burnitz Inc. includes coupons that may be presented at retail stores to obtain discounts on other Burnitz products. Retailers are reimbursed for the face amount of coupons redeemed plus 10% of that amount for handling costs. Burnitz honors requests for coupon redemption by retailers up to 3 months after the consumer expiration date. Burnitz estimates that 60% of all coupons issued will ultimately be redeemed. Information relating to coupons issued by Burnitz during 2020 is as follows.
| Consumer expiration date |
12/31/20
|
|
| Total face amount of coupons issued |
$800,000
|
|
| Total payments to retailers as of 12/31/20 |
330,000
|
What amount should Burnitz report as a liability for unredeemed coupons at December 31, 2020?
3. Roland Company sold 700,000 boxes of pie mix under a new sales promotional program. Each box contains one coupon, which submitted with $4.00, entitles the customer to a baking pan. Roland pays $6.00 per pan and $0.50 for handling and shipping. Roland estimates that 70% of the coupons will be redeemed, even though only 250,000 coupons had been processed during 2020. What amount should Roland report as a liability for unredeemed coupons at December 31, 2020?
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