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113 - Engineering
Civil Engineering (BSCE 01)
Ateneo de Davao University
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PREMIUMS AND WARRANTY
PREMIUMS 1. RUSSIA Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost RUSSIA P3 each. RUSSIA estimates that 40 percent of the coupons will be redeemed. Data for 2030 and 2031 are as follows: 2030 2031 Bags of dog food sold 500,000 600, Leashes purchased 18,000 22, Coupons redeemed 120,000 150, The premium expense for 2030 is The estimated liability for premiums at December 31, 2030 is The estimated liability for premiums at December 31, 2031 is PREMIUMS 2. In an effort to increase sales, Disc Company began a sales promotion campaign on June 30, 2031. Part of this promotion included placing a special coupon in each package of candy bars sold. Customers were able to redeem ten coupons for a Frisbee. Each premium costs Disc P1. Disc estimated that 60 percent of the coupons issued will be redeemed. For the six months ended December 31, 2031, the following information is available: Packages of candy bars sold ..........................,200, Premiums purchased .................................... 172, Coupons redeemed ...................................... 1,425, What is the estimated liability for premium claims outstanding at December 31, 2031? Determine the amount of expense on premium. PREMIUMS3. In an effort to increase sales, Colorless Razor Blade Company inaugurated a sales promotion campaign on June 30, 2022, whereby Colorless placed a coupon in each package of razor blades sold, the coupons being redeemable for a premium. Each premium costs Colorless P0, and five coupons must be presented by a customer to receive a premium. Colorless estimated that only 60 percent of the coupons issued will be redeemed. For the six months ended December 31, 2022, the following information is available: Packages of razor blades sold ......................... 400, Premiums purchased .................................... 30, Coupons redeemed ...................................... 100, What is the estimated liability for premium claims outstanding at December 31, 2022? PREMIUMS4. Southern Studios, in an effort to promote the release of their new movie "Ninja Kid," began a national sales promotion campaign. Two coupons from specially marked boxes (one coupon in each box) of "Sugar Melt Charms" cereal are redeemable for one ticket to the show. Tickets cost Southern P1 each. Southern estimates that 40 percent of the coupons will be redeemed. At the end of 202 2, the following information is available: Boxes of cereal sold 640, Movie tickets purchased by Southern 140, Coupons redeemed 250, What is the estimated liability for premium claims outstanding at December 31, 202 2? PREMIUMS5. Partilan ng Bayan Company started a new promotional program. For every 10 box tops returned to Partilan ng Bayan, customers receive a basketball. Partilan ng Bayan estimates that only 60% of the top researching the market will be redeemed. Additional information is as follows: Units Amount Sales of product 100,000 30,000, Basketball purchased 5,500 4,125, Basketball distributed 4, What is the amount of year-end estimated liability associated with this promotion? PREMIUMS 6. During 20X0, ABC Company sold 500,000 boxes of cake mix under a new sales promotional program. Each box contained one coupon, which entitled the customer to a baking pan upon remittance of P40. The entity paid P50 per pan and P5 for handling and shipping. The entity estimated that 80% of the
coupons will be redeemed, even though only 350,000 coupons had been processed during 20X0. During 20X1, ABC Company sold 700,000 boxes of cake mix and 600,000 coupons were processed. Assume that ABC’s estimate changes in 20X1 from 80% to 90%, what amount should be reported as liability for unredeemed coupons on December 31, 20X1? PREMIUMS 7 ABC Cereal Co. frequently distributes coupons to promote new products. On October 1, 2023 , ABC mailed 1,000,000 coupons for P0 off each box of cereal purchased. ABC expects 120,000 of these coupons to be redeemed before the December 31, 2023 , expiration date. It takes thirty days from the redemption date for ABC to receive the coupons from the retailers. ABC reimburses the retailers an additional P for each coupon redeemed. As of December 31, 2023 , ABC had paid retailers P25,000 related to these coupons and had 50,000 coupons on hand that had not been processed for payment. What amount should ABC report as a liability for coupons in its December 31, 2023 balance sheet? PREMIUMS 8 ABC Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 4 boxtops from ABC Frosted Flakes boxes and P1. The company estimates that 60% of the boxtops will be redeemed. In 2016 , the company sold 500,000 boxes of Frosted Flakes and customers redeemed 220,000 boxtops receiving 55,000 bowls. If the bowls cost ABC Company P3 each, how much liability for outstanding premiums should be recorded at the end of 201 6? PREMIUMS 9 At the beginning of current year, Daisy Corporation began marketing a new beer called “Serbesa”. To help promote the product, the management is offering a special Serbesa beer mug to each customers for every 20 especially marked bottle caps of Serbesa. The entity estimated that out of the 300,000 bottles of Serbesa sold during the year, only 50% of the marked bottle caps would be redeemed. During the year, the entity purchased 8,000 beer mugs at a total cost of P360,000 or P45 each and had already distributed 4, mugs to customers. What is the estimated premium liability at year-end? (Answer should be at least four decimal places allowance) WARRANTY 1. During 2030, Guinea Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 4% within 12 months following sale and 8% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2030 and 2031 are as follows: Actual Warranty Sales Expenditures 2030 P 800,000 P24, 2031 1,000,000 60, P1,800,000 P84, At December 31, 2031, Guinea should report an estimated warranty liability of WARRANTY2. In 2030, BLAH Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows: First year of warranty 2% Second year of warranty 5% Sales and actual warranty expenditures for 2030 and 2031 are presented below: 2030 2031 Sales P600,000 P800, Actual warranty expenditures 20,000 40, What is the estimated warranty liability at the end of 2031? WARRANTY3 Moore Company estimates its annual warranty expense as 2% of annual net sales. The following data relate to the calendar year 20 3 0: Net sales P1,800, Warranty liability account
113 - Engineering
Course: Civil Engineering (BSCE 01)
University: Ateneo de Davao University
