Use the Following Information for Questions
Kent Co -The Estimated Liability for Premiums at December 31, 2006 Is

question 78

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, 2006 is

• A)$7,500.
• B)$10,000.
• C)$17,500.
• D)$20,000.

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Definitions:

Depreciation

The process of methodically allocating the expense of a physical asset over its functional life.

Sales Price

The amount at which goods or services are sold to customers, sometimes before discounts, taxes, or additional charges.

Equipment Cost

The total expense incurred in purchasing and preparing equipment for its intended use, including acquisition, delivery, and setup costs.

Land Account

An account in the financial statements that tracks the cost of land owned by a company.