What amount should young report as a liability for stamp

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Young Trading Stamp Co. records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Young's past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Young's liability for stamp redemptions was P7,500,000 at December 31, 2019.

Additional information for 2015 is as follows:

Stamp service revenue from stamps sold to licensees P5,000,000

Cost of redemption 3,400,000

Problem 1: If all the stamps sold in 2020 were presented for redemption in 2020, the redemption cost would be P2,500,000. What amount should Young report as a liability for stamp redemption at December 31, 2020?

Reference no: EM132910316

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