XYZ Co. includes one coupon in each bag of cat food it sells. In return for 4 coupons, customers receive a toy that the company purchases for £1.20 each. XYZ's experience indicates that 70 percent of the coupons will be redeemed. During 2018, 100,000 bags of cat food were sold, 12,000 toys were purchased, and 40,000 coupons were redeemed. During 2019, 120,000 bags of cat food were sold, 16,000 toys were purchased, and 60,000 coupons were redeemed. Instructions (show computations) Determine the premium expense to be reported in the income statement and the premium liability on the statement of financial position for 2018 and 2019.

XYZ Co. includes one coupon in each bag of cat food it sells. In return for 4 coupons, customers receive a toy that the company purchases for £1.20 each. XYZ's experience indicates that 70 percent of the coupons will be redeemed. During 2018, 100,000 bags of cat food were sold, 12,000 toys were purchased, and 40,000 coupons were redeemed. During 2019, 120,000 bags of cat food were sold, 16,000 toys were purchased, and 60,000 coupons were redeemed. Instructions (show computations) Determine the premium expense to be reported in the income statement and the premium liability on the statement of financial position for 2018 and 2019.

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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