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Question 3.
Question :
(TCO D) Edwards Co. includes one
coupon in each bag of dog food it sells. In return for four coupons,
customers receive a dog toy that the company purchases for $1.20 each.
Edward’s experience indicates that 60% of the coupons will be
redeemed. During 2010, 100,000 bags of dog food were sold, 12,000
toys were purchased, and 40,000 coupons were redeemed. During 2011,
120,000 bags of dog food were sold, 16,000 toys were purchased, and
60,000 coupons were redeemed.
Instructions:
Determine the premium expense to be reported in the income statement
and the estimated liability for premiums on the balance sheet for 2010
and 2011.
Question 4.
Question :
(TCO D) On January 1, 2011, Piper Co.
issued 10-year bonds with a face value of $1,000,000 and a stated
interest rate of 10%, payable semiannually on June 30 and December 31.
The bonds were sold to yield 12%. Table values are:
11.470
Instructions:
- Calculate the issue price of the bonds.
- Without prejudice to your solution in Part (a), assume that the issue
price was $884,000. Prepare the amortization table for 2011, assuming
that amortization is recorded on interest payment dates.