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How much is the estimated liability as of December

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Reference no: EM132766835

Question - 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 -

a. How much is the premium expense in 2002?

b. How much is the estimated liability as of December 31, 2002?

Reference no: EM132766835

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