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    Coupon Redemptions & Estimated Liability

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    A Music Shop gives its customers coupons redeemable for a poster plus a Beyonce CD. One coupon is issued for each dollar of sales. On the surrender of 100 coupons and $5.00 cash, the poster and CD are given to the customer. It is estimated that 80% of the coupons will be presented for redemption. Sales for the first period were $700,000, and the coupons redeemed totaled 340,000. Sales for the second period were $840,000, and the coupons redeemed totaled 850,000. The Music Shop bought 20,000 posters at $2.00/poster and 20,000 CDs at $6.00/CD.

    Instructions
    Prepare the following entries for both periods, assuming all the coupons expected to be redeemed from the first period were redeemed by the end of the second period.
    (a) To record coupons redeemed
    (b) To record estimated liability

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    https://brainmass.com/business/bond-valuation/coupon-redemptions-estimated-liability-255751

    Solution Preview

    A Music Shop gives its customers coupons redeemable for a poster plus a Beyonce CD. One coupon is issued for each dollar of sales. On the surrender of 100 coupons and $5.00 cash, the poster and CD are given to the customer. It is estimated that 80% of the coupons will be presented for redemption. Sales for the first period were $700,000, and the coupons redeemed totaled 340,000. Sales for the second period were $840,000, and the coupons redeemed totaled 850,000. The Music Shop bought 20,000 posters at $2.00/poster and 20,000 CDs at $6.00/CD.

    Instructions
    Prepare the following entries for both periods, assuming all the coupons expected to be redeemed from ...

    Solution Summary

    Coupon redemption and estimated liability is examined.

    $2.19

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