Use the Following Information for Questions
Kent Co -The Estimated Liability for Premiums at December 31, 2007 Is

question 26

Multiple Choice

Use the following information for questions
Kent Co.includes one coupon in each bag of dog food it sells.In return for eight coupons, customers receive a leash.The leashes cost Kent $2.00 each.Kent estimates that 40 percent of the coupons will be redeemed.Data for 2006 and 2007 are as follows: $\begin{array}{lrr}&2006&2007\\\text { Bags of dog food sold } & 500,000 & 600,000 \\\text { Leashes purchased } & 18,000 & 22,000 \\\text { Coupons redeemed } & 120,000 & 150,000\end{array}$
-The estimated liability for premiums at December 31, 2007 is

• A)$11,250.
• B)$21,250.
• C)$22,500.
• D)$42,500.

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Definitions:

Main-Purpose Rule

A legal principle that if the main purpose of a guarantor to sign a surety agreement is to secure a personal benefit, the agreement does not have to be in writing to be enforceable.

Secondary Obligation

An obligation that arises indirectly or as a result of another primary obligation, often in legal or financial contexts.

Statute of Frauds

A legal concept that requires certain types of contracts to be written and signed to be enforceable.

Statute of Frauds

A legal concept that requires certain types of contracts to be executed in writing and signed by the party against whom enforcement is sought, to be legally enforceable.