Question

During 2018, Deluxe Leather Goods issued 728,000 coupons which entitles the customer to a $4.30 cash refund when the coupon is submitted at the time of any future purchase. Deluxe estimates that 70% of the coupons will be redeemed. 265,000 coupons had been processed during 2018. At December 31, 2018, Deluxe should report a liability for unredeemed coupons of _____

Answer 1

$1,051,780

Step-by-step explanation:

The computation of the liability for unredeemed coupons is shown below:

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

= (728,000 coupons × 70% - 265,000 coupons) × $4.30

= 244,600 coupons × $4.30

= $1,051,780

Simply first we determined the number of unredeemed coupons and then multiplied it by the coupon worth