1. What is the premium expense for 2021? 2. What is the estimated liability for premiums on December 31, 2021?

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter7: Inventories: Cost Measurement And Flow Assumptions
Section: Chapter Questions
Problem 3MC: During 2019, R Corp., a manufacturer of chocolate candies, contracted to purchase 100,000 pounds of...
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1. What is the premium expense for 2021?

2. What is the estimated liability for premiums on December 31, 2021?

In an effort to increase sales, Mill Company inaugurated a sales promotional campaign on
June 30, 2021. The entity placed a coupon redeemable for a premium in each package of
cereal sold. Each premium cost P20 and five coupons must be presented by a customer
to receive a premium. The entity estimated that only 60% of the coupons issued would
be redeemed.
For the six months ended December 31, 2021, the following information is available:
Packages of cereal sold
Premium purchased
Coupons redeemed
160,000
12,000
40,000
Transcribed Image Text:In an effort to increase sales, Mill Company inaugurated a sales promotional campaign on June 30, 2021. The entity placed a coupon redeemable for a premium in each package of cereal sold. Each premium cost P20 and five coupons must be presented by a customer to receive a premium. The entity estimated that only 60% of the coupons issued would be redeemed. For the six months ended December 31, 2021, the following information is available: Packages of cereal sold Premium purchased Coupons redeemed 160,000 12,000 40,000
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