Premium expense-inventory of premiums

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Reference no: EM139985

Bonita places a coupon in each box of its product. Customers may send in five coupons and $3, and the company will send them a recipe book. Sufficient books were purchased at a cost of $5 each. A total of 400,000 boxes of product were sold in 2010. It was estimated that 6% of the coupons would be redeemed. During 2010, 8,000 coupons were redeemed. Which entry should be made at December 31, 2010?

Select one:

a. Premium Expense 6,400

Inventory of Premiums 6,400

b. Premium Expense 16,000

Estimated Premium Claims Outstanding 16,000

c. Premium Expense 6,400

Estimated Premium Claims Outstanding 6,400

d. Premium Expense 9,600

Estimated Premium Claims Outstanding 9,600

Reference no: EM139985

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