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How much is the estimated liability for premium claims

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Obama Company inaugurated a sales promotional campaign on August 31, 2015 in its desire to improve sales. Obama placed a coupon redeemable for a premium in each ream of bond papers sold. Each premium costs Obama P20 and five coupons must be presented by a customer to receive a premium. Obama estimated that only 70% of the coupons issued would be redeemed.

For the four months ended December 31,2015, the following information is available:

Reams of bond paper sold             Premiums purchased             Coupons redeemed

400,000                                              30,000                                 100,000

Problem 1: How much is the estimated liability for premium claims outstanding at December 31, 2015?

Reference no: EM132832684

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