Ayayai van Leeuwen operates a very busy roadside fruit and vegetable stand from May to October every year as part of his farming operation, which has a December 31 year end and uses ASPE. Each time a customer purchases over $10 of produce, Ayayai gives the customer a special fruit-shaped sticker that can't be copied. If a customer collects 10 of these stickers, they can have $10 worth of produce at no charge. The stickers must be redeemed by June 30 of the following year. During the current year, 20,000 stickers were given out to customers. Ayayai knows from experience that some stickers will never be cashed in, because the customer may not shop at his stand frequently enough to collect 10 stickers, or they get lost or forgotten. In previous years, 8% of stickers have been redeemed. During the current year, 5% of the stickers given out were redeemed. Ayayai uses the expense approach to account for premiums and estimates that product costs are 60% of their selling prices. (a) Your answer is partially correct. Determine the amount that should be reported as premium expense on the December 31 income statement and the amount of any liability at December 31 . Premium expense Ayayai Auto Repairs is preparing the financial statements for the year ended November 30,2023 . As the accountant, you are looking over the information regarding short-term liabilities, and determining the amounts that should be reported on the balance sheet. Ayayai reports under ASPE. The following information regarding new corporate initiatives has been brought to your attention. 1. Ayayai printed a coupon in the local newspaper in November 2023 . The coupon permits customers to take 8% off the cost of any service between November 1, 2023, and January 30, 2024. The newspaper has a circulation of 11,500 customers. In November, 30 coupons were used by customers, resulting in sales reductions of $250. It is expected that 45 more coupons will be used before January 30 , and the average sales transaction for Ayayai is $75. 2. To reduce the costs associated with production downtime due to sick days taken, Ayayai developed a new plan in 2023. Employees are permitted up to 6 sick days per year with pay. If these days are not all used, then 50% of the unused time will be accumulated and can be used as paid vacation within the next year; otherwise, the rights will expire at the end of the next fiscal year. During 2023, 2 employees were eligible for the plan and each used 2 of their 6 days. The daily rate of pay for each employee is $220. These 2 individuals are long-term employees of the company who are unlikely to resign in the near future and who have been relatively healthy in the past. 3. Ayayai is considering starting a customer loyalty program. The program would involve tracking the purchases of each customer on a small card that they retain. Each time a customer reaches $230 in total purchases, they would get a $10 discount on the next purchase. (a) For items that affect the 2023 financial statements, determine the amount of any liability that should be reported and the related expense
