FAR EASTERN UNIVERSITY

Intermediate Accounting
Long Quiz 1
Name :________________

Section : _______________

Instructions:

1. Write your answers eligibly on a yellow sheet.

2. Provide your solution. Answer without solutions will give you no merit.
3. Take a photo of your answers and send to achua@feu.edu.ph

I. Problems

Case 1: During the current year ABC Co. 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 P 40.

The entity paid P 50 per pan and P5 for handling and shipping and estimated that 80% of the coupons
would be redeemed, even though only 300,000 coupons had been processed during the year.

1. What is the premium expense for the current year? (3 points)

2. What amount should be reported as liability for unredeemed coupons at year-end? (3 points)

Case 2: In packages of the products, DEF Corp. included coupons that may be presented at retail stores
to obtain discounts on other DEF Corp. products.

Retailers were reimbursed for the face amount of coupons redeemed plus 10% of that amount for
handling costs.

The entity honored requests for coupon redemption by retailers up to three months after the consumer
expiration date.

The entity estimated that 70% of all coupons issued would ultimately be redeemed. The consumer
expiration date is December 31, 2023.

The total face amount of coupons issued was P 600,000 and the total payments to retailers during 2023
amounted to P 220,000.

3. What is the premium expense for 2023? (3 points)

4. What amount should be reported as liability for unredeemed coupons on December 31, 2023?
(3 points)

Case 3: GHI Co. mailed coupons to consumers which may be presented at a stated expiration date at
retail food stores to obtain discounts on certain GHI Co. products.

Retailers were reimbursed for the face value of coupons redeemed plus 10% of coupon face value as
compensation for handling costs.
The entity honored requests for coupon redemption by retailers received up to three months after the
expiration date. Based on the past experience, 60% of the coupons issued ultimately are redeemed.

Information with respect to the two separate series of coupons issued during 2023 is as follows:

Series A Series B

Consumer expiration date June 30, 2023 December 31, 2023

Total face value of coupons issued 1,000,000 2,000,000

Total payments to retailers on 12/31/2023 605,000 405,000

5. What amount should be reported as liability for unredeemed coupons on December 31, 2023?
(3 points)

Case 4: ABC Corp. sold consumer products that are packaged in boxes. The entity offered an unbreakable
glass in exchange for two box tops and P 50 as a promotion during the current year. The cost of the glass
was P 200. The entity estimated at the end of the year that it would be probable that 50% of the box
tops will be redeemed.

The entity sold 100,000 boxes of the product during the current year and 40,000 box tops were
redeemed during the year.

What amount should be reported as estimated liability at year-end? (3 points)

Case 5: DEF Co. started a new promotional program. For every 10 box tops returned, customers receive a
basketball.

The entity estimated that only 60% of the box tops reaching the market would be redeemed.

Units Amount

Sales of product 100,000 30,000,000

Basketball purchased 5,500 4,125,000
Basketball distributed 4,000

6. What is the premium expense for the year? (3 points)

7. What is the amount of year-end estimated liability associated with this production? (3 points

Case 6: Charo Co., includes one coupon in each box of laundry soap it sells. A towel is offered as a
premium to customers who send in 10 coupons and a remittance of P 10.

Distributions cost of premium is P5. Experience indicates that only 30% of the coupons will be
redeemed.

2023 2024

Boxes of soap sold 2,000,000 2,500,000

Number of towels purchased at P 50 each 50,000 80,000

Coupons redeemed 400,000 700,000

8. What is the premium expense for 2023? (3 points)

9. What is the estimated premium liability on December 31, 2023? (3 points)
10. What is the premium expense for 2024? (3 points)
11. What is the estimated premium liability on December 31, 2024? (3 points)

Case 7: DEF Corp. offered a cash rebate of P 20 on each P 150 package of batteries sold during the
current year. Historically, 10% of customers mail in the rebate form.

During the year, 600,000 packages of batteries are sold, and 25,000 P 20 rebates are mailed to
customers.

12. What amount of rebate expense should be reported for the current year? (3 points)
13. What amount should be reported as rebate liability at year-end? (3 points)

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