An Electronics Store Is Running a Promotion Where for Every

question 84

Multiple Choice

An electronics store is running a promotion where for every video game purchased, the customer receives a coupon upon checkout to purchase a second game at a 50% discount. The coupons expire in one year. The store normally recognized a gross profit margin of 40% of the selling price on video games. How would the store account for a purchase using the discount coupon?

• A) The reduction in sales price attributed to the coupon is recognized as premium expense.
• B) The difference between the cost of the video game and the cash received is recognized as premium expense.
• C) Premium expense is not recognized.
• D) The difference between the cost of the video game and the selling price prior to the coupon is recognized as premium expense.

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Definitions:

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