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This year, Angela began promoting a new toy by including a coupon, redeemable for a movie ticket, in each toy's carton. The movie ticket, which cost Angela, $2, is purchased in advance and then mailed to the customer when Angela receives the coupon. Based on past experience, Angela estimated that 60% of the coupons would be redeemed. Forty percent of the coupons would be actually redeemed this year. The remaining 20% of the coupons were expected to be redeemed next year.
How should Angela account for the toy promotion campaign in this year?
the company should record the tickets as an asset on their balance sheet.

What would be the other side of the entry??

Solution Preview

At the time of the purchase of the tickets Angela's company records them as an asset in the Prepaid Movie Ticket account

Debit Credit
Prepaid Movie Tickets (An Asset ...

Solution Summary

Accounting for a Promotional Coupon that is redeemable in the future.