Question

General Product Inc. distributed 140 million coupons in 2021. The coupons are redeemable for 40 cents each. General anticipates that 70% of the coupons will be redeemed. The coupons expire on December 31, 2022. There were 56 million coupons redeemed in 2021 and 45 million redeemed in 2022. General recognizes coupon expense in the period coupons are issued. What was General's coupon promotional expense in 2022?

Answer 1

Answer:

$1.2 million

Explanation:

The computation of General's coupon promotion expense in 2022 is shown below:-

But before that we need to do following calcualtions

General's coupon promotion expense in 2021 = Shipped coupons × Redeemable cents × Redeemed Coupon percentage

= 140 million × $0.40 × 70%

= $39.2  million

Redemption in 2021 = Coupons redeemed × Redeemable cents

= $56 million × $0.40

= $22.40  million

Redemption in 2022 = Coupons redeemed × Redeemable cents

= $45 million × $0.40

= $18 million  million

So,

General's coupon promotional expense in 2022 = Redemption in 2021 + Redemption in 2022 - General's coupon promotion expense in 2021

= ($22.40 million + $18 million) - $39.2  million

= $1.2 million