Question
Flavor Food Company distributes to consumers coupons which may be presented (on or before a stated expiration date) to grocers for discounts on certain products
Flavor Food Company distributes to consumers coupons which may be presented (on or before a stated expiration date) to grocers for discounts on certain products of Flavor. The grocers are reimbursed when they send the coupons to Flavor. In Flavor's experience, 50% of such coupons are redeemed, and generally one month elapses between the date a grocer receives a coupon from a consumer and the date Flavor receives it. During 2018 Flavor issued two separate series of coupons as follows:
ConsumerAmount Disbursed
Issued OnTotal ValueExpiration Dateas of 12/31/18
1/1/18$500,0006/30/18$236,000
7/1/18840,00012/31/18350,000
The only journal entry recorded to date is: debit to coupon expense and credit to cash of $815,000. The December 31, 2018 balance sheet should include a liability for unredeemed coupons of:
a) $0.
b) $70,000.
c) $184,000.
d) $420,000.
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