D is corrent. The requirement is to determine the amount that should be accrued as an estimated liability. The estimated liability at the end of the current year is calculated as follows: boxes sold 100,000 × 50% estimated to be redeemed = 50,000 box tops estimated to be redeemed. Since 40,000 box tops have been redeemed, this leaves an estimated 10,000 box tops to be redeemed. It takes 2 box tops and $1 to receive the unbreakable glass. Therefore, 5,000 (10,000 ÷ 2) unbreakable glasses are estimated to be redeemed. The cost of the glasses is $2.00 each, and 5,000 units × $2.00 = $10,000, which is the estimated cost of the glasses. However, the customer must pay $1.00 per glass, so the estimated liability is $5,000 ($10,000 cost less $5,000 customer payment), and this answer is correct.
A is incorrect. The estimated liability at the end of the current year is calculated as follows: boxes sold 100,000 × 50% estimated to be redeemed = 50,000 box tops estimated to be redeemed. Since 40,000 box tops have been redeemed, this leaves an estimated 10,000 box tops to be redeemed. It takes 2 box tops and $1 to receive the unbreakable glass. Therefore, 5,000 (10,000 ÷ 2) unbreakable glasses are estimated to be redeemed. The cost of the glasses is $2.00 each, and 5,000 units × $2.00 = $10,000, which is the estimated cost of the glasses. However, the customer must pay $1.00 per glass, so the estimated liability is $5,000 ($10,000 cost less $5,000 customer payment).
A is incorrect. The estimated liability at the end of the current year is calculated as follows: boxes sold 100,000 × 50% estimated to be redeemed = 50,000 box tops estimated to be redeemed. Since 40,000 box tops have been redeemed, this leaves an estimated 10,000 box tops to be redeemed. It takes 2 box tops and $1 to receive the unbreakable glass. Therefore, 5,000 (10,000 ÷ 2) unbreakable glasses are estimated to be redeemed. The cost of the glasses is $2.00 each, and 5,000 units × $2.00 = $10,000, which is the estimated cost of the glasses. However, the customer must pay $1.00 per glass, so the estimated liability is $5,000 ($10,000 cost less $5,000 customer payment).
C is incorrect. The estimated liability at the end of the current year is calculated as follows: boxes sold 100,000 × 50% estimated to be redeemed = 50,000 box tops estimated to be redeemed. Since 40,000 box tops have been redeemed, this leaves an estimated 10,000 box tops to be redeemed. It takes 2 box tops and $1 to receive the unbreakable glass. Therefore, 5,000 (10,000 ÷ 2) unbreakable glasses are estimated to be redeemed. The cost of the glasses is $2.00 each, and 5,000 units × $2.00 = $10,000, which is the estimated cost of the glasses. However, the customer must pay $1.00 per glass, so the estimated liability is $5,000 ($10,000 cost less $5,000 customer payment).
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