Reference no: EM132869277

Problem 1 - At the beginning of current year, Clam Company offers the customers a pottery cereal bowl if they send in three box tops from the products and P10. The entity estimated that 60% of the boxtops would be redeemed.

During the year, the entity sold 675,000 boxes and customers redeemed 330,000 boxtops receiving 110,000 bowls. The cost of each bowl is P25.

1. What is the premium expense for the current year?

a. 2,025,000

b. 6,075,000

c. 4,550,000

d. 1,650,000

2. What is the liability for outstanding premiums at year-end?

a. 250,000

b. 375,000

c. 625,000

d. 875,000

Problem 2 - Jamaica Company, a retailer of electrical goods, participates in a customer loyalty program operated by an airline. The entity grants program members one air travel point for every P1,000 spent on electrical goods.

Program members can redeem the points for travel with the airline subject to availability. The entity pays the airline P60 for each point.

1. What amount should be recognized as product sales revenue?

a. 4,500,000

b. 4,050,000

c. 5,000,000

d. 2,500,000

2. What is the net revenue from points?

a. 450,000

b. 150,000

c. 200,000

d. 300,000