During the year, L&M Leather Goods sold 1,160,000 reversible belts under a new sales promotional program. Each belt carried one rebate certificate which entitles the customer to a $4.70 cash refund when the rebate is submitted for redemption. L&M estimates that 76% of the rebates will be redeemed. 495,000 rebates had been submitted for redemption during the year. At December 31, L&M should report a liability for unredeemed rebate certificates of:

Question

Business

Amaris Johns

1 June, 12:42

During the year, L&M Leather Goods sold 1,160,000 reversible belts under a new sales promotional program. Each belt carried one rebate certificate which entitles the customer to a $4.70 cash refund when the rebate is submitted for redemption. L&M estimates that 76% of the rebates will be redeemed. 495,000 rebates had been submitted for redemption during the year. At December 31, L&M should report a liability for unredeemed rebate certificates of:

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Jett Watts · Answer 1

Answer:Liability for Un-redeemed Certificate = $1,817,020

Explanation:

Total estimated value of redeemed rebates = Goods sold * Cash rebate * Certificate rebated

Total estimated value of redeemed rebates = $1,160,000 * $4.70 * 76%

Total estimated value of redeemed rebates = $4,143,520

Less: Value of Certificate Processed during the Year = Certificate processed * Cash rebated

Value of Certificate Processed during the Year = 495,000 * $4.70

Value of Certificate Processed during the Year = $2,326,500

Liability for Un-redeemed Certificate = Total estimated value of redeemed rebates - Value of Certificate Processed during the Year

Liability for Un-redeemed Certificate = $4,143,520 - $2,326,500

Liability for Un-redeemed Certificate = $1,817,020