Reference no: EM132791327
To Increase sales, Nowitzkl Company inaugurated a promotional campaign on June 30, 2018. Nowitzki placed a coupon redeemable for a premium In each box of cake sold at P200. A coffee mug costing P30 is offered as a premium to customers who send 5 coupons and a remittance of P10. The distribution cost per premum Is P5. Nowitzkl estimated that only 80% of the coupons issued will be redeemed.
For the six months ended December 31, 2018, the following is available:
a) Boxes of cakes sold 20,000
b) Premiums purchased 3,000
c) Coupons redeemed 10,000
On January 1, 2018, Sarngani Company showed the following:
Long term note P 6,000,000
- At the end of 2017, Saranganl had started to experience extreme ?nancial pressure and is In default In meeting interest payment on its long term not. This had continued until 2018. The company did not accrued the interest for 2018. The Interest rate is 10% payable every December 31.
In an agreement with the creditor, Saraganl Company obtained the following changes in the terms of the notes:
a) The accrued interest is forgiven.
b) The principal obligation will be due on December 31, 2023. c) The new interest rate is 8%.
Problem 1: How much should Nowltzki Company report for the estimated liability for coupons in December 31, 2018? 35. How much is the gain on debt restructuring to be recognized by Samngani?