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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?
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