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Aud Prob Liab
Aud Prob Liab
Aud Prob Liab
Problem 2 Premiums
In packages of its products, AA Inc. incudes coupons that may be presented at retail stores to obtain discounts on other AA’s products. Retailers are
reimbursed for the face amount of coupons redeemed plus 10% of that amount of the handling costs. AA honors requests for coupon redemption by
retailers up to 3 months after the consumer expiration date. AA estimates that 60% of all coupons issued will ultimately be redeemed. Information
relating to coupons issued by AA during 2012 is as follows:
Consumer expiration date Dec. 31, 2012
Total payments to retailers as of Dec. 31, 2012 165,000
Liability for unredeemed coupon as of Dec. 31, 2012 99,000
What is the total face amount of coupons issued by AA, Inc. in 2012?
Problem 3 Premiums
BB Co. sells its products in expensive, reusable containers. The customer is charged deposit for each container delivered and receives a refund for
each container returned within two years after the year of deliver. BB Co., accounts for the containers not returned within the limit as being sold at
the deposit amount. Information for 2012 is as follows:
Containers held by customers at Dec. 31, 2011, from
deliveries in: 2010 85,000
2011 240,000 325,000
Containers delivered in 2012 430,000
Containers returned in 2012 from deliveries in 2012: 2010 57,500
2011 140,000
2012 157,000 354,500
A. How much revenue from container sales should be recognized for 2012?
B. What is the total amount of BB’s liability for returnable containers at Dec. 31, 2012?
Problem 5 Bonds
The following data were obtained from the initial audit of DD Inc.
Treasury Bonds
Redemption price and interest to date on 200 bonds permanently retired on
Dec. 31, 2012 265,000 265,000
A. Carrying value of the bonds payable at Dec. 31, 2012.
B. Loss on bond redemption
C. Accrued interest on bonds at Dec. 31, 2012
D. Bond interest expense for the year ended Dec. 31, 2012