In December,2016,Shooger Candy Company began including one coupon in each package of candy and offered customers a Stuffed Shooger Bear in exchange for $5 and five coupons.The stuffed bears cost Shooger $5.30 each.Eventually,it is expected that 40% of the coupons will be redeemed.During December,Shooger sold 280,000 packages of candy and no coupons were redeemed.In its December 31,2016 balance sheet,what amount should Shooger report as estimated liability for the coupons?
A)$168,000
B)$118,720
C)$10,080
D)$6,720

Question

Quizplus · Accepted Answer

Since no coupons were redeemed, there is no liability to recognize as of December 31, 2016. The liability for coupons would only need to be recognized if and when they are redeemed. Therefore, the estimated liability for the coupons on December 31, 2016, is $0, making choice D the correct answer.

In December,2016,Shooger Candy Company Began Including One Coupon in Each