Use the following information for questions 127, 128, and 129.
Muggs Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Muggs $3 each. Muggs estimates that 45 percent of the coupons will be redeemed. Data for 2014 and 2015 are as follows:
-The premium liability at December 31, 2014 is
A) $37,500.
B) $54,000.
C) $45,000.
D) $39,375.

Question

Use the following information for questions 127, 128, and 129.
Muggs Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Muggs $3 each. Muggs estimates that 45 percent of the coupons will be redeemed. Data for 2014 and 2015 are as follows: 
-The premium liability at December 31, 2014 is
A) $37,500. 
B) $54,000. 
C) $45,000. 
D) $39,375.

Quizplus · Accepted Answer

Without the specific details of the calculation or context provided in the question, it's impossible to accurately explain why D) $39,375 is the correct answer. Premium liability calculations typically involve assessing the amount of premium that has been received but not yet earned, and this can depend on the terms of the insurance contracts, the period of coverage, and how much of the premium has been recognized as revenue over time.

Use the Following Information for Questions 127, 128, and 129