Question

During 2018, Deluxe Leather Goods issued 841,000 coupons which entitles the customer to a $4.20 cash refund when the coupon is submitted at the time of any future purchase. Deluxe estimates that 73% of the coupons will be redeemed. 381,000 coupons had been processed during 2018. At December 31, 2018, Deluxe should report a liability for unredeemed coupons of:

Answer 1

$978,306

Step-by-step explanation:

The computation of the unremembered liability coupons is shown below:

= (Number of coupons issued × redeemed coupon percentage) - (processed coupons) × worth of coupon

= (841,000 coupons × 73%) - (381,000 coupons) × $4.20

= (613,930 coupons - 381,000 coupons) × $4.20

= 232,930 coupons × $4.20

= $978,306

We simply deduct the processed coupons from the redeemed coupons and then multiply it by the coupon worth