What is the definition of a liability

Reference no: EM132088251

Question: XYZ is marketing a new product at the end of 2015. The product will sell for $4 per unit and costs $3 per unit to manufacture. As a marketing incentive, the company creates two money-off coupons. Coupon A, which is mailed to prospect customers, allows a customer to purchase 1 unit at a discounted price of $3.50 in 2016. Coupon B is attached to each regularly priced unit and allows customers to purchase a second unit at $3.50 in 2016. For simplicity, assume that 10,000 of Coupon A have been distributed and that 20,000 of Coupon B were issued when products were sold during 2015. Also assume that all coupons will be redeemed. What liability, if any, should be recorded as of 12/31/2015. Use the definition of a liability from Statement of Financial Accounting Concepts No. 6 to explain your treatment and be sure to show your computations if you conclude that a liability must be recorded.

Reference no: EM132088251

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