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How much should be reported as premium expense for coupons

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Reference no: EM132938341

Lancer Company inaugurated a promotional campaign on January 2, 2011 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 10 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, 2011, the following transactions occurred:

Packages of cereal sold 120,000
Premium purchased 30,000
Coupons redeemed 54,000

Problem 1: How much should be reported as premium expense for coupons on the fiscal year ended July 31, 2011?

Problem 2: How much is the estimated liability for coupons on the fiscal year ended July 31, 2011?

Reference no: EM132938341

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