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## Muggs Co. includes one coupon in each bag of dog food

\$15.99

\$15.99

Muggs Co. includes one coupon in each bag of dog food 1. During 2013, Salton Co. introduced a new line of machines that carry a three-year warranty against manufacturerâ€™s defects. Based on industry experience, warranty costs are estimated at 1% of sales in the year of sale, 3% in the year after sale, and 4% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: (assume the accrual method) Sales Actual Warranty Expenditures 2013 \$ 1,400,000 \$ 26,000 2014 1,000,000 40,000 2015 1,400,000 90,000 \$3,800,000 \$156,000 What amount should Salton report as a liability at December 31, 2015? a. \$0 b. \$14,000 c. \$22,000 d. \$148,000 2. Crispy Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 4 boxtops from Crispy Frosted Flakes boxes and \$1. The company estimates that 60% of the boxtops will be redeemed. In 2014, the company sold 500,000 boxes of Frosted Flakes and customers redeemed 220,000 boxtops receiving 55,000 bowls. If the bowls cost Crispy Company \$3 each, how much liability for outstanding premiums should be recorded at the end of 2014? a. \$150,000 b. \$40,000 c. \$60,000 d. \$84,000 Use the following information for questions 3, 4, and 5. Muggs Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Muggs \$3 each. Muggs estimates that 45 percent of the coupons will be redeemed. Data for 2014 and 2015 are as follows: 2014 2015 Bags of dog food sold 500,000 600,000 Leashes purchased 18,000 22,000 Coupons redeemed 120,000 150,000 3. The premium expense for 2014 is a. \$187,500. b. \$45,000. c. \$75,000. d. \$84,375. 4. The premium liability at December 31, 2014 is a. \$37,500. b. \$54,000. c. \$45,000. d. \$39,375. 5. The premium liability at December 31, 2015 is a. \$22,500. b. \$39,375. c. \$45,000. d. \$84,375. Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help

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