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Journalize the sales and purchase of premiums

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Reference no: EM133003276

Question - Mr. Clean Company included one coupon in each box of laundry soap sold at P100 per box. A towel was offered as a premium to customers who send in 10 coupons and a remittance of P10. Distribution cost of premium is P5. Experience indicated that only 30% of the coupons will be redeemed.

 

2017

2018

Boxes of soap sold

200,000

250,000

Numbers of towels purchased at P50 each

5,000

8,000

Coupons redeemed

40,000

70,000

Required -

-Journalize the sales, purchase of premiums, redemption of premium, and accrual of premium in 2017 and 2018.

-Compute for the total premium expense for 2017 and 2018.

-Compute for the estimated premium liability on December 31, 2017 and 2018.

Reference no: EM133003276

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