Case Cereal distributed 875,000 coupons on 10/2/18 each coupon gets $0.50 off each box of cereal...
Case Cereal distributed 875,000 coupons on 10/2/18 each coupon gets $0.50 off each box of cereal purchased. It is expected that 125,000 coupons redeemed by 3/31/19, expiration date. Retailer where paid an additional $0.05 for each coupon redeemed. As of 12/31/18, retailers where paid $31,625 to the coupons and had on hand 50,000 coupons that had not been processed for payment. Determine the coupon (premium) liability to be reported on the 12/31/18, balance sheet.
Homework Answers
Total liability = 125,000*($0.50 + $0.05)
= 125,000*$0.55
= $68,750
Amount paid = $31,625
Coupon liability reported on 12/31/18 = ($68,750 - $31,625)
= $ 37,125
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