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What amount should camacho report as a liability

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Reference no: EM132228876

Question - Camacho Trading Stamp Co. records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Camacho's past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Camacho's liability for stamp redemptions was $7,500,000 at December 31, 2017. Additional information for 2018 is as follows:

Camacho Trading Stamp service revenue from stamps sold to licensees - $5,000,000

Cost of redemptions - $3,400,000

If all the stamps sold in 2017 were presented for redemption in 2018, the redemption cost would be $2,500,000. What amount should Camacho report as a liability for stamp redemptions at December 31, 2018?

a. $9,100,000.

b. $6,600,000.

c. $6,100,000.

d. $4,100,000.

Reference no: EM132228876

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