A company had sales of $1 million.Coupons in the amount of $1 per $10 in sales were given to paying customers.History has shown that 50% of all coupons are redeemed.Which of the following statements is correct?
A)No provision is necessary.
B)A provision for $100,000 must be recognized.
C)A provision for $1 million must be recognized.
D)A provision for $50,000 must be recognized.

Question

Quizplus · Accepted Answer

Given the sales of $1 million and a coupon rate of $1 per $10 in sales, the total potential coupon value is $100,000. With a 50% redemption rate, the expected redemption value is $50,000, necessitating a provision for this amount.

A Company Had Sales of $1 Million