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John Company includes three coupons in each package of cookies it sells. In exchange for 20 coupons, a customer will receive a cookie sheet. John
John Company includes three coupons in each package of cookies it sells. In exchange for 20 coupons, a customer will receive a cookie sheet. John estimates that 30% of the coupons will be redeemed. In 2016, John sold 4,000,000 boxes of cookies and purchased 150,000 Cookie sheets at $2.50 each. During the year, 970,000 coupons were redeemed. Refer to Exhibit 9-3. What amount should John record as premium expense for 2016?
$375,000
$500,000
$450,000
$121,250
Please show work. Thank you
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