Question

VREUN Downloadable eTextbook CALCULATOR FULL SCREEN PRINTER VERSION BACK Exercise 152 Sterling Co. includes one coupon in each bag of dog food it sells. In return for 4 coupons, customers receive a dog toy that the company purchases for $1.40 each. Sterling's experience indicates that 60 percent of the coupons will be redeemed. During 2017, 101,000 bags of dog food were sold, 12,010 toys were purchased, and 40,400 coupons were redeemed. During 2018, 118,400 bags of dog food were sold, 16,300 toys were purchased, and 59,200 coupons were redeemed. Determine the premium expense to be reported in the income statement and the premium liability on the balance sheet for 2017 and 2018. 2017 2018 Premium expenses Premium liability SAVE FOR LATER SEET ANSWER Question Attempts: 0 of 3 used

premium expense and liability

Answer 1

5

Ponu Premium Expense 2012 1,01,000 bags sold. Rate $1.4 60% of Coupons are redeemed 2014 1, 18,400 bags sold Rale $114 60% of coupons are redeemed. 1, 18,400xb0% = 71,040 71,040/4 = 17,760 1,01,000X 60% - 60,600 60,600/4 215,150 IS150x $1.4=$21,210 -17,760x $1,4 = $ 24,864 ② Premium Liability 2017 2018 1,01,000 60690 = 40,400 40,400/4 = 10,100 15,150 10100 = 5050 1,18,400-71,040 = 47,369 47,360/4 = 6,766 17,760 (-) 6766 = 10994 Sosox $1,4=$7,070 10,994x$114 = $15,392 SENS 20 .