Posted: April 13th, 2016

What amount should Newell report as a liability for unremembered coupons ??


1. Marquart Stamp Company records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Marquart’s past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Marquart’s liability for stamp redemptions was $13,000,000 at December 31, 2009. Additional information for 2010 is as follows:

-Stamp service revenue from stamps sold to licenses $9,500,000
-Cost of redemptions (stamps sold prior to 1/1/12) $6,000,000

If all the stamps sold in 2010 were presented for redemption in 2011, the redemption cost would be $5,200,000. What amount should Marquart report as a liability for stamp redemptions at December 31, 2010?

2. In packages of its products, Wiseman Inc. includes coupons that may be presented at retail stores to obtain discounts on other Wiseman products. Retailers are reimbursed for the face amount of coupons redeemed plus 10% of that amount for handling costs. Wiseman honors requests for coupon redemption by retailers up to 3 months after the consumer expiration date. Wiseman estimates that 60% of all coupons issued will ultimately be redeemed. Information relating to coupons issued by Wiseman during 2010 is as follows:
-Consumer expiration date 12/31/12
-Total face amount of coupons issued $850,000
-Total payments to retailers as of 12/31/12 330,000
What amount should Wiseman report as a liability for unredeemed coupons at December 31, 2010?

3. Newell Company sold 600,000 boxes of pie mix under a new sales promotional program. Each box contains one coupon, which submitted with $4.00, entitles the customer to a baking pan. Newell pays $6.00 per pan and $0.50 for handling and shipping. Newell estimates that 70% of the coupons will be redeemed, even though only 250,000 coupons had been processed during 2010. What amount should Newell report as a liability for unredeemed coupons at December 31, 2010?

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