126. LeMay Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 4 boxtops from LeMay Frosted Flakes boxes and $1.00. The company estimates that 60% of the boxtops will be redeemed. In 2010, the company sold 500,000 boxes of Frosted Flakes and customers redeemed 220,000 boxtops receiving 55,000 bowls. If the bowls cost LeMay Company $2.50 each, how much liability for outstanding premiums should be recorded at the end of 2010? a. $20,000 b. $30,000 c. $50,000 d. $70,000 Use the following information for questions 127, 128, and 129. Mott Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Mott $2.00 each. Mott estimates that 40 percent of the coupons will be redeemed. Data for 2010 and 2011 are as follows: 2010 2011 Bags of dog food sold 500,000 600,000 Leashes purchased 18,000 22,000 Coupons redeemed 120,000 150,000 127. The premium expense for 2010 is 128. The estimated liability for premiums at December 31, 2010 is To download more slides, ebook, solutions and test bank, visit
Test Bank for Intermediate Accounting, Thirteenth Edition 13 - 28129. The estimated liability for premiums at December 31, 2011 is 130. Winter Co. is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Winter's lawyer states that it is probable that Winter will lose the suit and be found liable for a judgment costing Winter anywhere from $1,200,000 to $6,000,000. However, the lawyer states that the most probable cost is $3,600,000. As a result of the above facts, Winter should accrue a. a loss contingency of $1,200,000 and disclose an additional contingency of up to $4,800,000. b. a loss contingency of $3,600,000 and disclose an additional contingency of up to $2,400,000. c. a loss contingency of $3,600,000 but notdisclose any additional contingency. d. no loss contingency but disclose a contingency of $1,200,000 to $6,000,000. 131. Nance Company estimates its annual warranty expense as 4% of annual net sales. The following data relate to the calendar year 2010: Net sales $1,500,000 Warranty liability account Balance, Dec. 31, 2010 $10,000 debit before adjustment Balance, Dec. 31, 2010 50,000 credit after adjustment Which one of the following entries was made to record the 2010 estimated warranty expense?
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