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In 2 0 2 5 , an electronics store is running a promotion in which customers get a coupon for a free game for every

In 2025, an electronics store is running a promotion in which customers get a coupon for a free game for every 5 video games purchased. The coupons expire in one year. The cost of the game is $40 and the store normally recognizes a gross profit margin of 40% of the selling price on video games. How would the store account for the redemption of a coupon in 2025?
The cost of the video game is recognized as premium expense.
The difference between the cost of the video game and the selling price before the coupon is recognized as premium expense.
Premium expense is not recognized.
The reduction in sales price attributed to the coupon is recognized as premium expense.
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