The current (commonly used) accounting treatment for premiums and coupons requires that the costs should
A) be recorded at the maximum possible redemption cost in the year of the related sales.
B) be recorded at the total estimated redemption cost in the year of the related sales.
C) be recorded in the year(s) that the redemption is expected to occur.
D) not be recorded at all.

Question

Quizplus · Accepted Answer

The current accounting treatment for premiums and coupons requires that the costs should be recorded at the total estimated redemption cost in the year of the related sales. This is because the estimate of total redemption cost includes the costs associated with both the premium/coupon and the product or service being sold. Therefore, recording the cost in the year of the sale enables more accurate matching of costs and revenue.

The Current (Commonly Used) Accounting Treatment for Premiums and Coupons