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Calculate amount of premiums to be presented

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Reference no: EM132832685

Blue manufactures a special product. In an effort to increase sales, Blue Company inaugurated a sales promotion campaign on January 5, 2021, whereby Blue placed a coupon in each package of product sold, the coupons being redeemable for a premium. A premium is offered to customers who send in five coupons and remittance of P25. Blue estimated that only 75% percent of the coupons issued will be redeemed. The distribution cost per premium is P5.

Data for the premium during the year is presented below:

                                             Units                  Amount

Sales of product         (P250 each)         P12,500,000

Premiums purchased    (P80 each)       480,000

# of premiums distributed 5,500

Required: Calculate the following at the end of 2021:

Problem 1. Premium expense relating to the actual redemption __________________

Problem 2. Total premium expense in 2021 __________________

Problem 3. Amount of Premiums to be presented in the balance sheet __________________

Problem 4. Estimated premium liability at the end of 2021.

Reference no: EM132832685

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