Reference no: EM133055144
Questions -
Q1) During 2021, Mallow Company sold 500,000 boxes of hotcakes under a new sale promotional program. Each box contains one coupon, which when submitted with P16, entitles the customer to a baking pan. Mallow pays P20 per pan and P2 for hanc! and shipping.
Mallow estimates that 80% of the coupons will be redeemed, even though only 300,000 coupons had been processed during 2021.
What amount should Mallow's report as a liability for unredeemed coupons at December 31, 2021 December 31, 2021?
Q2) Lancer Company inaugurated a promotional campaign on January 2, 2021 to promote the salability of their product. Lancer Company placed a coupon redeemable for a premium in each package of cereal sold at P200. Each premium costs P25 and P10 coupons must be presented by a customer to receive a premium. Lancer estimated that only 70% of the coupons issued would be redeemed. For the 6 months ended July 31, 2021 the following transactions occurred:
Packages of cereal sold. 120,000
Premium purchased. 30,000
Coupons redeemed. 54,000
a) How much should be reported as premium expense for coupons on the fiscal year ended July 31, 2021?
b) How much should be reported as estimated liability for coupons on the fiscal year ended July 31, 2021?