Reference no: EM132959971
Question - Arborvitae Company introduce a new product during the year, to increase sales promotional campaign was made. Information for the promotional campaign are as follows:
In an effort to increase sales, Arborvitae Company inaugurated a sales promotional campaign on 1/1/2021. The company placed a coupon redeemable for a premium in each package of cereal sold. Each premium cost the firm P20. To receive a premium, a customer must present 10 coupons. The company estimates that only 50% of the coupons issued will be redeemed. The selling price of the cereal if P100 each. The following information are available:
Packages of cereal sold = 170,000
Premiums purchased = 10,000
Coupons redeemed = 50,000
The premiums can be sold at P30 each if not use in premium promotional program.
On 1/31/2021, Arborvitae Company began marketing a new soft drink. To help promote the soft drink, management is offering a special gift, a T-shirt, to each customer who returns 10 bottle crowns. The firm estimates that out of the 100,000 (P50 selling price each) bottles sold in 2021, only 70% will be redeemed. On 12/31/2021, the following information are collected:
T-shirts purchased = Units - 10,000; Cost - P900,000; Sales value - P1,000,000;
T-shirts distributed = Units - 4,200; Cost - 378,000; Sales value - 420,000
Required -
How much is the amount of outstanding liability for premiums (unearned premium income) in 12/31/2021?
How much is the amount of income from premiums recognized in 12/31/2021?