Edwards Co. includes one coupon in each bag of dog food it sells. In return for four coupons, customers receive a dog toy that the company purchases for 1.20 each. Edward's experience indicates that 60% of the coupons will be redeemed. During 2010, 100,000 bags of dog food were sold, 12,000 toys were purchased, and 40,000 coupons were redeemed. During 2011, 120,000 bags of dog food were sold, 16,000 toys were purchased, and 60,000 coupons were redeemed.© BrainMass Inc. brainmass.com June 4, 2020, 2:33 am ad1c9bdddf
This would be the proper calculation for 2010:
Premium expense = 100,000 bags divided by 4 coupons x 60% x $1.20 = $18,000
The estimated ...
The solution provides all calculations for the premium expense to be reported in the income statement and the estimated liability for premiums for Edwards Co.