Question:
On December 31, 2013, what amount should Patterson report as a romotional expense for coupons on its December 31, 2013, income statement?
Patterson Cereal includes one coupon in each package of Wheatos that it sells and offers a toy car in exchange for $1.00 and three coupons. The cars cost Patterson $1.50 each. Experience indicates that 40% of the coupons eventually will be redeemed. During the last month of 2013, the first month of the offer, Patterson sold 12 million boxes of Wheatos and 2.4 million of the coupons were redeemed.