6. Rosas Company started a promotional program in which for every 15 box tops returned,customers received a special mug. The entity estimated that only 60% of the box tops reachingthe market will be redeemed. The entity provided the following information for the currentyear:UnitsAmountProduct Sales10,00020,000,000150,000Mugs purchased500Mugs distributed350What amount should be recorded by Rosas Company as Estimated Liability for the current year?

Estimated Liability at the end of the year is the expected amount of mugs yet to be distributed for…

Answered: What amount should be recorded by Rosas…

Business

Accounting

What amount should be recorded by Rosas Company as Estimated Liability for the current year?

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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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

6. Rosas Company started a promotional program in which for every 15 box tops returned,
customers received a special mug. The entity estimated that only 60% of the box tops reaching
the market will be redeemed. The entity provided the following information for the current
year:
Units
Amount
Product Sales
10,000
20,000,000
150,000
Mugs purchased
500
Mugs distributed
350
What amount should be recorded by Rosas Company as Estimated Liability for the current year?

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