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How much is the premium expense for the year ended

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Question: In an effort to increase sales, Alabama Company inaugurated a sales promotional campaign on June 30, 2020. 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 five (5) coupons. The company estimates that only 45% of the coupons issued will not be redeemed. For the six months ended December 31, 2020, the following information are available:

Packages of cereal sold 170,000

Premiums purchased 25,000

Coupons redeemed 80,000

(a) How much is the premium expense for the year ended December 31, 2020?

(b) How much is the estimated liability for premium claims as of December 31, 2020?

(c) How much is the inventory of premium items as of December 31, 2020?

Reference no: EM132749479

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