SCANTRON. CALCULATION OF ACCRUAL OF PREMIUM EXPENSE/LIABILITY STEP ONE: determine the number of remaining coupons to be te total expected redemptions minus redemptions that occurred in year o 14 emaining coupons to be redeemed. This equals lot STEP TWO: Divide total expected redemptions from STEP ONE by required for one redemption ccted redemptions from STEP ONE by the # of coupons STEP THREE: Company's cost per redemption (Cash received from customer for one redemption) STEP FOUR: Premium Expense/Liability equals STEP TWO X STEP THREE PRACTICE PROBLEM: Irwin Music Shop gives its customers coupons redeemable for a poster plus a Bo Diddley CD One coupon is issued for each dollar of sales. On the surrender of 100 coupons and $5.00 cash the poster and CD are given to the customer. 15 estimated that 80% of the coupons will be presented for redemption Sales for the first period were $700.000, and the coupons redeemed totaled 420.000 Sales for the second period were $340,000, and the coupons redeemed totaled 750.000 Irwin Music, Shop bought 20,000 posters at $2.00/poster and 20.000 CDs at $6.00/CD. Instructions Prepare the following entries for the two periods, assuming all the coupons expected to be redeemed from the first period were redeemed by the end of the second period. first peaed .80 # $ 700 7000 = 700,000 got backs 420,000 700cco 420000 = 23,000.40 709,000