Asked by Aneri Patel on Jun 23, 2024
Verified
Ingram, Inc., places a coupon in each box of its product.Customers may send in ten coupons and $3, and the company will send them a CD.Sufficient CDs were purchased at $5 apiece.A certain number of boxes of product were sold in 2010.It was estimated that a total of 5% of the coupons will be redeemed.In 2010, 18, 000 coupons were redeemed.Mailing costs were $0.40 per CD.At December 31, 2010, the following adjusting entry was made to record the estimated liability for premium outstanding:
Required:
Compute the number of boxes of product sold by Ingram in 2010.
Coupons
Debt instruments offering interests or discounts issued by companies to raise capital, or vouchers offering discounts on goods and services.
Redeemed
Refers to the buyback or repayment of a security such as a bond at its maturity date.
Premium
An amount paid in addition to the standard or nominal cost, often associated with insurance or the additional amount above the par value for securities.
- Discuss the accounting treatment for product warranties, litigation claims, and premium offers.
Verified Answer
LT
Laura ThompsonJun 23, 2024
Final Answer :
$5.00−$3.00+$0.40=$2.40$10,800,2.40=4,500CD ’s 4,500′10=45,000 coupons yet to be redeemed 45,000+18,000=63,000 total coupons to be redeemed 0.05x=63,000x=1,26000 number of hoxes sold \begin{array}{ll}\$ 5.00-\$ 3.00+\$ 0.40 & =\$ 2.40 \\\$ 10,800,2.40 & =4,500 \mathrm{CD} \text { 's } \\4,500^\prime10 & =45,000 \text { coupons yet to be redeemed } \\45,000+18,000 & =63,000 \text { total coupons to be redeemed } \\0.05 \mathrm{ x }& =63,000 \\ \mathrm{x}& =1,26000\text { number of hoxes sold }\end{array}$5.00−$3.00+$0.40$10,800,2.404,500′1045,000+18,0000.05xx=$2.40=4,500CD ’s =45,000 coupons yet to be redeemed =63,000 total coupons to be redeemed =63,000=1,26000 number of hoxes sold
Learning Objectives
- Discuss the accounting treatment for product warranties, litigation claims, and premium offers.