Rendina Inc

question 114

Multiple Choice

Rendina Inc.offers a cash rebate of Rs50 on each Rs200 package of biscuits sold during the last three months of 2011.Historically, 30% of the company's customers mail in the rebate form.During the last three months of 2011, 7,700,000 packages of biscuits are sold, and 1,470,000 Rs50 rebates are mailed to customers.What is the rebate expense and liability, respectively, shown on the company's 2011 financial statements?

• A)Rs115,500,000; Rs42,000,000.
• B)Rs115,500,000; Rs115,500,000.
• C)Rs1,155,000; Rs735,000.
• D)Rs$11,550,000; Rs4,550,000.

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Definitions:

Accounts Receivable Turnover

A financial ratio indicating how quickly a company collects cash from credit sales by measuring the number of times accounts receivable are collected during a period.

Average Collection Period

The average number of days it takes for a business to receive payments owed by its customers.

Net Credit Sales

The total value of sales made on credit minus returns and allowances, reflecting the actual credit sales revenue generated.

Accounts Receivable

Amounts owed to a company by customers for products or services that have been delivered but not yet paid for.