Jackpine Trading Stamp Co.records trading stamp revenue and provides for the cost of redemptions in the year stamps are sold to licensees.Jackpine's past experience indicates that only 75% of the stamps sold to licensees will be redeemed.Jackpine's liability for stamp redemptions was $3,000,000 at December 31, 2014.Additional information for 2014 is as follows: If all the stamps sold in 2014 were presented for redemption in 2015, the redemption cost would be $1,000,000.What amount should Jackpine report as a liability for stamp redemptions at December 31, 2014?
A)$3,750,000
B)$2,650,000
C)$2,400,000
D)$1,650,000

Question

Jackpine Trading Stamp Co.records trading stamp revenue and provides for the cost of redemptions in the year stamps are sold to licensees.Jackpine's past experience indicates that only 75% of the stamps sold to licensees will be redeemed.Jackpine's liability for stamp redemptions was $3,000,000 at December 31, 2014.Additional information for 2014 is as follows:  If all the stamps sold in 2014 were presented for redemption in 2015, the redemption cost would be $1,000,000.What amount should Jackpine report as a liability for stamp redemptions at December 31, 2014?
A)$3,750,000 
B)$2,650,000 
C)$2,400,000 
D)$1,650,000

Quizplus · Accepted Answer

The Answer of Jackpine Trading Stamp Co.records trading stamp revenue and provides for the cost of redemptions in the year stamps are sold to licensees.Jackpine's past experience indicates that only 75% of the stamps sold to licensees will be redeemed.Jackpine's liability for stamp redemptions was $3,000,000 at December 31, 2014.Additional information for 2014 is as follows:  If all the stamps sold in 2014 were presented for redemption in 2015, the redemption cost would be $1,000,000.What amount should Jackpine report as a liability for stamp redemptions at December 31, 2014?
A)$3,750,000 
B)$2,650,000 
C)$2,400,000 
D)$1,650,000