During the year, L&M Leather Goods sold 1,000,000 reversible belts under a new sales promotional program. Each belt carried one rebate certificate which entitles the customer to a $4.00 cash refund when the rebate is submitted for redemption. L&M estimates that 70% of the rebates will be redeemed. 500,000 rebates had been submitted for redemption during the year. At December 31, L&M should report a liability for unredeemed rebate certificates of:

Question

Quizplus · Accepted Answer

1,000,000 × 70% × $4 = $2,800,000
500,000 × $4 = $2,000,000
$2,800,000 - $2,000,000 = $800,000

During the Year, L&M Leather Goods Sold 1,000,000 Reversible Belts