Question - With some of its products, Schmitt Company includes coupons that are redeemable in merchandise. The coupons have no expiration date and, in the company's experience, 40% of them are redeemed. The liability for unredeemed coupons at December 31, 2010, was $9000. During 2011, coupons worth $30,000 were issued, and merchandise worth $8000 was distributed in exchange for coupons redeemed.
Instructions - Compute the amount of the liability that should appear on the December 31, 2011, balance sheet.