In Year 4, the firm distributed $60,000 worth of coupons for use by customers when they buy certain products. The management of the firm estimates that 25% of the coupons will be redeemed. The coupons have no expiration date. The management of the firm authorizes merchants to add 20% to the value of coupons redeemed to offset management’s ‘pain and suffering’ when dealing with these coupons. During the year, payments of $11,500 have been made to merchants redeeming coupons. This was the first time Orion had distributed coupons to any customers.

REQUIRED: 

Expense in Year 4 from offering these coupons: $________ Estimated Liability at Dec. 31, Year 4, resulting from this coupon offering: $_______
 

In Year 4, the management of Orion made an offer of employment to a top-performing manager with its leading competitor. In addition to a base salary amount Orion’s management offered the individual the opportunity to earn a bonus based on the firm’s income above a base of $300,000. The bonus percentage is 3% of the firm income above a base level of $300,000 after tax and after bonus. The firm’s tax rate is 25%. The manager wants you to estimate the bonus assuming the firm’s actual total income for the next year will be $500,000.

Answer rating: 100% (QA)

1 Expense in offering coupons Total coupon offered 600002... View the full answer