Estimated Premium Liability
of cake mixer under a new sales promotional
ABC Company manufactures a certain product,
and sells it at P 300 per unit.
A plate is offered to customers on the return of 5
wrappers plus a remittance of P10.
The plate costs P 50, and it is estimated that
60% of the wrappers will be redeemed. The data
for the first year concerning the premium plan
are summarized below:
Sales, 10,000 units at P 300 each
Plates purchased, 2,000 units at P 50
each
Wrappers redeemed 4,000
Required:
Prepare Journal Entries
Compute the amount reported as
estimated premium liability.
In an effort to increase sales, Mills Company
inaugurated a sales promotional campaign on
June 30, 2018. The entity placed a coupon
redeemable for a premium in each package of
cereal sold. Each premium cost P20 and five
coupons must be presented by a customer to
receive a premium. The entity estimated that
only 60% of the coupons must be presented by a
customer to receive a premium. The entity
estimated that only 60% of the coupons issued
would be redeemed. For the 6 months ended
December 31, 2018, the following information is
available
Packages of cereal sold 160,000
Premium purchased 12,000
Coupons redeemed 40,000
What is the estimated liability for premiums on
December 31, 2018?
During 2018, Day Company sold 500,000 boxes
program. Each box contained one coupon, which
entitled the customer to a baking pan upon
remittance of P 40. The entity paid P 50 per pan
and P5 for handling and shipping and estimated
that 80% of the coupons would b redeemed,
even though only 300,000 coupons had been
processed during 2018. What amount should be
reported as a liability for unredeemed coupons
on December 31, 2018?
Customer Loyalty Program
An entity, a grocery retailer, operates a customer
loyalty program. The entity grants program
members loyalty points when they spend a
specified amount on groceries. Program
members can redeem the points for further
groceries. The points have no expiry date. The
sales during 2018 amounted to P 9,000,000
based on stand-alone selling price. During 2017,
the customer earned 10,000 points.
Management expects that 80% of 8,000 of these
points will be redeemed.
The stand-alone selling price of each loyalty
point is estimated at P 100.
On December 31, 2017, 4,000 points have been
redeemed in exchanged for groceries
In 2018, the management revised expectations
and now expects that 90% or 9,000 points will be
redeemed altogether.
During 2018, the entity redeemed 4,100 points.
In 2019, a further 900 points are redeemed.
Management continues to expect that only 9,000
points will ever be redeemed, meaning no more
points will be redeemed after 2019
Required: Prepare Journal Entries
An entity, a retailer of electrical goods,
participates in a customer loyalty program
operated by an airline.
The entity grants program members one air
travel point for every P 1,000 spent on electrical
goods
Program members can redeem the points for
travel with the airline subject to availability. The
entity pays the airline P 60 for each point.

During the current year, the entity sold electrical

goods for consideration totaling P 4,500,000
based on the stand-alone selling price and
granted 5,000 points with stand-alone selling
price of P 100 per point.