In 2018, Holyoak Inc. offers a coupon for $20 off qualifying purchases of its new line of products. Holyoak sold 10,000 of these products during the year. By year-end of 2018, 7,100 had been redeemed and the $20 reduction of purchase price provided to customers.
-Holyoak's historical experience with such coupons indicates that 85% of customers use the coupon. What is the promotional coupon liability that Holyoak should report in its December 31, 2018, balance sheet?

Question

In 2018, Holyoak Inc. offers a coupon for $20 off qualifying purchases of its new line of products. Holyoak sold 10,000 of these products during the year. By year-end of 2018, 7,100 had been redeemed and the $20 reduction of purchase price provided to customers. 
-Holyoak's historical experience with such coupons indicates that 85% of customers use the coupon. What is the promotional coupon liability that Holyoak should report in its December 31, 2018, balance sheet?

Quizplus · Accepted Answer

This is (8,500 expected - 7,100 paid) × $20 = $28,000.