Question

General Product Inc. distributed 100 million coupons in 2018. The coupons are redeemable for 30 cents each. General anticipates that 70% of the coupons will be redeemed. The coupons expire on December 31, 2019. There were 45 million coupons redeemed in 2018 and 30 million redeemed in 2019. What was General's coupon promotion expense in 2018?

Answer 1

coupon expense 21 millions

coupon liability 21 millions

Step-by-step explanation:

for 2018

it distributed 100 million coupon so it will recognize a liablity and expense related to this ammount.

100 million x 70 % chance x 30 cent = 21 millions

coupon expense 21 millions

coupon liability 21 millions

Then when the cuopon are redeem it will record:

45 millon x 30cents = 13.5 million

coupon liability 13.5 million

cash 13.5 million