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What is the estimated liability for premiums to be reported

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Reference no: EM133186034

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Q1. In an effort to increase sales, Careful Company launched a sales promotional campaign. Careful placed a coupon redeemable for a premium in each package of product sold. Each premium costs P20 and five coupons must be presented by a customer to receive a premium. Careful estimated that only 60% of the coupons issued will be redeemed. The following information are available for the year 2021:

Packages sold - 160,000

Premiums purchased - 12,000

Coupons redeemed - 40,000

What is the estimated liability for premiums to be reported on December 31, 2021?

Q2. On January 2, 2022, Bergify Co. entered into a 5-year lease contract for drilling equipment. Bergify recorded the lease liability for P2,400,000, which includes a present value of P100,000 for the purchase option. Bergify estimates that the fair value of the equipment at the end of its 8-year economic life will be P200,000. Bergify uses double-declining method of depreciating its assets.

What amount should Bergify recognize as depreciation expense on the leased asset for 2022?

Reference no: EM133186034

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