What amount should be reported as premium expense for the current year? During the current year, Day Company sold 500,000 boxes ofcakemix under a new sales promotional program.Each box contained one coupon, which entitled the customer to abaking pan upon remittance of P40.The entity paid P50 per pan and P5 for handling and shipping andestimated that 80% of the coupons would be redeemed, even thoughonly 300,000 coupons had been processed during the year.CS Scarned with CamScanteer

Premium (Gift) means the product given free of cost to the customer on fulfilling the certain…

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What amount should be reported as premium expense for the current year?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 23P

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During 2021, SUGA Company sold 485,000 boxes of cereals under a new sales promotional program. Each box contains one coupon, which entitles the customer to a premium that cost the company ₱75. Five coupons plus a remittance of ₱20 must be presented by the customer to receive a premium. SUGA estimated that 85% of the coupons will be redeemed. Actual premiums redeemed were 5,000 units. Additional information disclosed that ₱10 per premium is incurred for storage and distribution. Compute for the premium expense for the year.
During 2021, SUGA Company sold 485,000 boxes of cereals under a new sales promotional program. Each box contains one coupon, which entitles the customer to a premium that cost the company ₱75. Five coupons plus a remittance of ₱20 must be presented by the customer to receive a premium. SUGA estimated that 85% of the coupons will be redeemed. Actual premiums redeemed were 5,000 units. Additional information disclosed that ₱10 per premium is incurred for storage and distribution. REQUIRED: 1. Compute for the liability for the unredeemed coupons. 2. Compute for the premium expense for the year.
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