Question

Oslo Food Company distributes to consumers coupons which may be presented (on or before a stated expiration date) to grocers for discounts on certain products of Flavor. The grocers are reimbursed when they send the coupons to Oslo. In Oslo's experience, 55% of such coupons are redeemed, and generally one month elapses between the date a grocer receives a coupon from a consumer and the date Oslo receives it. During 2021 Oslo issued two separate series of coupons as follows:

Consumer Amount Disbursed
Issued On Total Value Expiration Date as of 12/31/18
1/1/18 $500,000 6/30/18 $236,000
7/1/18 840,000 12/31/18 350,000
The only journal entry recorded to date is: debit to coupon expense and credit to cash of $815,000. The December 31, 2018 balance sheet should include a liability for unredeemed coupons of:_____.
a) $0.
b) $70,000.
c) $184,000.
d) $420,000.

Answer 1

Answer: $112,000

Step-by-step explanation:

$840,000 worth of coupons had been issued. The company expects that 55% of these coupons will be redeemed.

= 840,000 * 55%

= $462,000

Out of this, by year end only $350,000 have been disbursed, the amount left as a liability will be:

= 462,000 - 350,000

= $112,000

Options are probably for another variant of the question.