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The Lowe Company sells cake mixes. The company began a coupon offer in 20x5, as follows: When customers redeem three proof of purchase coupons (a
The Lowe Company sells cake mixes. The company began a coupon offer in 20x5, as follows: When customers redeem three proof of purchase coupons (a single coupon is included in each box of cake mixes sold) plus $2.50, they will receive a set of three aluminum mixing bowls. The coupon offer will expire on June 30, 20x7. Based on past experience with similar offers, the percentage of cake mix box coupons expected to be returned to the company for redemption is 70% Each set of mixing bowls has a cost of 4.50 Shipping and handling costs for a set of mixing bowls is estimated to be 1.50 The number of boxes of cake mixes sold during 20x5 and 20x6 300,000 The number of coupons redeemed as of December 31, 20x6 90,000 REQUIRED: Determine the amount of estimated liability for coupons that should be reported on the balance sheet dated December 31, 20x6
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