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  • Problem 1-2

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    Nowitzki Company ran a promotional campaign from June 30 to December 31, 2018 where customers received a coupon for a premium with each cake box purchased. Customers could redeem 5 coupons and pay P10 to receive a P30 coffee mug. While 20,000 boxes were sold, only 10,000 coupons were redeemed, meaning there are an estimated 2,000 unredeemed coupons still outstanding at the end of the period. Dirk Company introduced a new product in 2017 with a 2-year warranty. Sales in 2017 were P5M and actual warranty costs were P150k. In 2018, sales were P6M and actual costs were P550k. To estimate outstanding warranty liability

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    PROBLEM 1-2

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    Nowitzki Company ran a promotional campaign from June 30 to December 31, 2018 where customers received a coupon for a premium with each cake box purchased. Customers could redeem 5 coupons and pay P10 to receive a P30 coffee mug. While 20,000 boxes were sold, only 10,000 coupons were redeemed, meaning there are an estimated 2,000 unredeemed coupons still outstanding at the end of the period. Dirk Company introduced a new product in 2017 with a 2-year warranty. Sales in 2017 were P5M and actual warranty costs were P150k. In 2018, sales were P6M and actual costs were P550k. To estimate outstanding warranty liability

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    84 views1 page

    Problem 1-2

    Uploaded by

    Joy
    Nowitzki Company ran a promotional campaign from June 30 to December 31, 2018 where customers received a coupon for a premium with each cake box purchased. Customers could redeem 5 coupons and pay P10 to receive a P30 coffee mug. While 20,000 boxes were sold, only 10,000 coupons were redeemed, meaning there are an estimated 2,000 unredeemed coupons still outstanding at the end of the period. Dirk Company introduced a new product in 2017 with a 2-year warranty. Sales in 2017 were P5M and actual warranty costs were P150k. In 2018, sales were P6M and actual costs were P550k. To estimate outstanding warranty liability

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    PROBLEM 1

    To increase sales, Nowitzki Company inaugurated a promotional campaign on June 30, 2018. Nowitzki
    placed a coupon redeemable for a premium in each box of cake sold at P200. A coffee mug costing P30
    is offered as premium to customers who send in 5 coupons and a remittance of P10. The distribution
    cost per premium is P5. Nowitzki estimated that only 80% of the coupons issued will be redeemed. For
    the six months ended December 31, 2018, the following is available:

    Boxes of cake sold 20,000


    Premiums purchased 3,000
    Coupons redeemed 10,000
    What is the estimated liability for coupons on December 31, 2018?

    PROBLEM 2
    During 2017, Dirk Company introduced a new product carrying a two-year warranty against defects. The
    estimated warranty cost related to peso sales are 4% within 12 months following sale and 6% in the
    second 12 months following sale. Sales and actual warranty expenditures for the years ended December
    31, 2017 and 2018 are as follows:

    Sales Actual Expenditures


    2017 P5,000,000 P150,000
    2018 6,000,000 550,000
    At December 31, 2018, what would be reported as estimated warranty liability?

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