A company offers a cash rebate of $1 on each $4 package of light bulbs sold...
A company offers a cash rebate of $1 on each $4 package of light bulbs sold during
2021. Historically, 10% of customers mail in the rebate form. During 2021,
3,750,000 packages of light bulbs are sold, and 200,000 $1 rebates are mailed to
customers. What is the rebate expense and liability, respectively, shown on the
2021 financial statements dated December 31?
Homework Answers
Rebate Expense = 3,750,000 x 10% x $1 = $ 375,000
Rebate Liability = $ 375,000 - $ 200,000 = $ 175,000
Therefore, $ 375,000 and $ 175,000 are rebate expense and liability, respectively, shown on the 2021 financial statements dated December 31.
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