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: The estimated liability for premiums at December 31, 2010 is A) $7,500. B) $10,000. C) $17,500. D) $20,000. Solution 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: The estimated liability for premiums at December 31, 2010 is A) $7,500. B) $10,000. C) $17,500. D) $20,000..

1. 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:
The estimated liability for premiums at December 31, 2010 is
A) $7,500.
B) $10,000.
C) $17,500.
D) $20,000.
Solution
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:
The estimated liability for premiums at December 31, 2010 is
A) $7,500.
B) $10,000.
C) $17,500.
D) $20,000.