Albertson Corporation began a special promotion in July 2018 in an attempt to in

Question

Albertson Corporation began a special promotion in July 2018 in an attempt to increase sales. A coupon was provided at various grocery stores upon checkout. Customers could send in five coupons to receive $3.25. Albertson's management estimated that 70% of the coupons would be redeemed. For the six months ended December 31, 2018, the following information is available:

Required:
What is the estimated liability associated with the coupons at December 31, 2018?

Explanation / Answer

CALCULATION OF THE ESTIMATED LIABILITY OF COUPONS AT THE DECEMBER 31,2018 Coupons Distributed =                 25,00,000 Estimated coupons redemmed = 70% =                 17,50,000 Less: Coupons Redeemed                   5,65,000 Balance estimated coupon do be redeemed =                 11,85,000 Against five coupon we receive $ 3.25 So against 11,85,000 coupons = (11,85,000 /5 ) X $ 3.25 = $               7,70,250 Answer = Esimated liability = $ 770,250

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