Premium Liability

What should be the journal entry when customers claimed their premiums?

• Dr. Premiums; Cr. Cash

• Dr. Premiums; Cr. Premium Expense

• Dr. Premium Expense; Cr. Premiums

When customers claimed their premiums on the year following the sale of merchandise, what should be the account to be debited?

• Premium expense

• Estimated premium liability

• Premiums

Premiums are generally classified as

• Current asset

• Noncurrent asset

• Current liability

When are we going to initially recognize the estimated premium liability?

• At the end of the year when merchandise is sold, and some premiums are still outstanding

• Initial recognition would be on the year following the sale of merchandise

• Immediately recognize the liability when premiums are purchased

Moonlight Co. sold 500,000 boxes of pastries. Each box contained one coupon which entitled a customer to a customized plate upon remittance of P40. The entity paid P50 per customized plate and P5 for handling and shipping and estimated that 80% of the coupons would be redeemed. Only 300,000 coupons were redeemed during the current year. How much is the premium expense for the current year?

• 22,000,000

• 16,000,000

• 6,000,000

Moonlight Co. sold 500,000 boxes of pastries. Each box contained one coupon which entitled a customer to a customized plate upon remittance of P40. The entity paid P50 per customized plate and P5 for handling and shipping and estimated that 80% of the coupons would be redeemed. Only 300,000 coupons were redeemed during the current year. How much should be reported as estimated premium liability for unredeemed coupons at year-end?

• 4,000,000

• 1,500,000

• 5,500,000

Botcom Co. started a sales promotional program: for every 10 boxes returned, customers receive a mug. The entity estimated that only 70% of the mugs would be redeemed.

Sales of product: 100,000 units ; P30,000,000

Mugs purchased: 5,500 units ; P 4,125,000

Mugs distributed 4,000 units

How much is the premium expense for the year?

• 4,500,000

• 5,250,000

• 7,500,000

Botcom Co. started a sales promotional program: for every 10 boxes returned, customers receive a mug. The entity estimated that only 70% of the mugs would be redeemed.

Sales of product: 100,000 units ; P30,000,000

Mugs purchased: 5,500 units ; P 4,125,000

Mugs distributed: 4,000 units

Estimated premium liability at year-end would be

• 2,250,000

• 1,500,000

• 4,500,000

Hatte Co. included one coupon in each package sold. A premium is offered to customers who send in five coupons. What amount should be reported as premium expense for 2018?

• 1,000,000

• 5,000,000

• 1,250,000

Hatte Co. included one coupon in each package sold. A premium is offered to customers who send in five coupons. What amount should be reported as premium expense for 2019?

• 2,400,000

• 1,920,000

• 2,650,000