Use the Following Information for Questions 127, 128, and 129

question 77

Multiple Choice

Use the following information for questions 127, 128, and 129.
Muggs Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Muggs $3 each. Muggs estimates that 45 percent of the coupons will be redeemed. Data for 2014 and 2015 are as follows:
-The premium liability at December 31, 2014 is

• A) $37,500.
• B) $54,000.
• C) $45,000.
• D) $39,375.

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Definitions:

Principal Consideration

The main or most significant factor influencing a decision or agreement in a contractual arrangement.

Charitable Organizations

Nonprofit entities that operate for the purpose of providing aid and assistance for those in need.

Governmental Units

Entities established by governmental authorities to perform specific functions, such as cities, counties, and special districts.

Merchandise

Goods that are bought and sold in business, often synonymous with stock or inventory.