Reference no: EM132754418
In an effort to increase sales, Blue Razor Blade Company inaugurated a sales promotion campaign on June 30, 2002, whereby Blue placed a coupon in each package of razor blades sold, the coupons being redeemable for a premium. Each premium costs Blue P.50, and five coupons must be presented by a customer to receive a premium. Blue estimated that only 60 percent of the coupons issued will be redeemed. For the six months ended December 31, 2002, the following information is available:
Packages of razor blades sold ......................... 400,000
Premiums purchased ........................................... 30,000
Coupons redeemed ............................................... 100,000
Requirements:
Problem a. How much is the premium expense in 2002?
Problem b. How much is the estimated liability as of December 31, 2002?