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What is the premium liability on December

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Reference no: EM133126441

Question - Dairy King Chocolate Company sells chocolate bars to various customers. It includes one coupon in each chocolate bar sold. A premium item was offered to customers who send in five coupons and a remittance of P20. Other necessary cost of distributing premium items is P35. Experience indicated that only 40% of the coupons will be redeemed.

Pertinent data are presented below:

 

2019

2020

Chocolate bars sold

1,000,000

2,000,000

Premium items purchased at P75 each

60,000

150,000

Coupons redeemed

250,000

600,000

Required -

1. What is the premium expense for 2019?

2. What is the premium expense for 2020?

3. What is the premium liability on December 31, 2020?

Reference no: EM133126441

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