A cereal company issues coupons that can be exchanged for boxesof cereal. It issues...

Free

60.1K

Verified Solution

Question

Accounting

A cereal company issues coupons that can be exchanged for boxesof cereal. It issues two million coupons that promise the retailerwho redeems the coupons $1 per coupon. The probability ofredemption of any one coupon is 10%. What is the amount of theliability that the company recognizes?
a.
$2,000
b.
$20,000
c.
$100,000
d.
$200,000
e.
$2,000,000

Answer & Explanation Solved by verified expert

4.3 Ratings (704 Votes)

Ans is d. $200,000

Explanation: No of coupon issued = 2,000,000

Value of 1 coupon = x $1

Total Value of coupons = $2,000,000

Multiplied by Probability of redemption = x 10%

Amount of Liability = $200,000

Note: I have tried my best for correct solution and work , still you need any further help, please ask in comment and don’t forget to rate positively.

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

In: AccountingA cereal company issues coupons that can be exchanged for boxesof cereal. It issues two...A cereal company issues coupons that can be exchanged for boxesof cereal. It issues two million coupons that promise the retailerwho redeems the coupons $1 per coupon. The probability ofredemption of any one coupon is 10%. What is the amount of theliability that the company recognizes?a.$2,000b.$20,000c.$100,000d.$200,000e.$2,000,000