Tom Thumb Inc. distributes to consumers coupons which may be presen ted (on or b

ID: 2533615 • Letter: T

Question

Tom Thumb Inc. distributes to consumers coupons which may be presen

ted (on or before a stated expiration date) to grocers for discounts on certain Tom Thumb products. The grocers are

reimbursed when they send the coupons to Tom Thumb. In Tom Thumb's experience, 50% of

such coupons are redeemed, and generally one month elapses between the date a grocer receives

a coupon from a consumer and the date Tom Thumb receives it. During 2010, Tom Thumb

issued two separate series of coupons as follows:

Consumer Amount Disbursed

Issued On Total Value Expiration Date as of 12/31/10

1/1/10 $375,000 6/30/10 $177,000

7/1/10 540,000 12/31/10 225,000

The only journal entries to date recorded debits to coupon expense and credits to cash of

$536,000. The December 31, 2010 balance sheet should include a liability for unredeemed

coupons of

a. $45,000

b.$270,000

c. $93,000

d. $0

Answer

Option D : $ 0 (Zero)

Since all the coupons are expired as at 31 dec 2010, there shall be no liability for unredeemed coupons as at 31 Dec 2010.

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