A is corrent. The estimated liability at the end of the year is the value of the prizes expected to be distributed less the value of the prizes actually distributed. Only 600,000 box tops (2,000,000 box tops x 30%) are expected to be redeemed. Because 10 box tops must be redeemed for 1 prize, 60,000 prizes (600,000 box tops/10) are expected to be distributed. Only 28,000 prizes have been distributed. Thus, 32,000 more prizes are expected to be distributed. Each prize cost $.50 ($18,000/36,000 prizes). Therefore, Fulton has an estimated liability of $16,000 (32,000 prizes x $.50)
B is incorrect. The estimated liability at the end of the year is the value of the prizes expected to be distributed less the value of the prizes actually distributed. Only 600,000 box tops (2,000,000 box tops × 30%) are expected to be redeemed. Because 10 box tops must be redeemed for 1 prize, 60,000 prizes (600,000 box tops/10) are expected to be distributed. Only 28,000 prizes have been distributed. Thus, 32,000 more prizes are expected to be distributed. Each prize cost $.50 ($18,000/36,000 prizes). Therefore, Fulton has an estimated liability of $16,000 (32,000 prizes × $.50).
C is incorrect. The estimated liability at the end of the year is the value of the prizes expected to be distributed less the value of the prizes actually distributed. Only 600,000 box tops (2,000,000 box tops × 30%) are expected to be redeemed. Because 10 box tops must be redeemed for 1 prize, 60,000 prizes (600,000 box tops/10) are expected to be distributed. Only 28,000 prizes have been distributed. Thus, 32,000 more prizes are expected to be distributed. Each prize cost $.50 ($18,000/36,000 prizes). Therefore, Fulton has an estimated liability of $16,000 (32,000 prizes × $.50).
D is incorrect. The estimated liability at the end of the year is the value of the prizes expected to be distributed less the value of the prizes actually distributed. Only 600,000 box tops (2,000,000 box tops × 30%) are expected to be redeemed. Because 10 box tops must be redeemed for 1 prize, 60,000 prizes (600,000 box tops/10) are expected to be distributed. Only 28,000 prizes have been distributed. Thus, 32,000 more prizes are expected to be distributed. Each prize cost $.50 ($18,000/36,000 prizes). Therefore, Fulton has an estimated liability of $16,000 (32,000 prizes × $.50).
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