Question

Crispy Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 4 boxtops from Crispy Frosted Flakes boxes and $1. The company estimates that 60% of the boxtops will be redeemed. In 2014, the company sold 500,000 boxes of Frosted Flakes and customers redeemed 220,000 boxtops receiving 55,000 bowls. If the bowls cost Crispy Company $3 each, how much liability for outstanding premiums should be recorded at the end of 2014?

20,000

30,000

50,000

70,000

Answer 1

© solution: 50oooo Total Box tops sold customers, 60% by Estimated of box tops to be sent te 500000 x 60% 300000 220000 Box tops already send in Estimated of box tops left to be received 80000 Number of box tops needed per bowl 60000) Total bowls estimated to be sent to Customers in future 20000 Total premium liability to be recorded ((3-1) X 20000) $40000