CHAPTER 2: PREMIUM LIABILITY

Question 1

The cost of customer premium offer should be charged to expense

Answer 1

When the related product is sold

Question 2

The accounting concept that requires recognition of a liability for customer premium
offer is

Answer 2

Matching principle

Question 3

Accounting for cost of incentive program for frequent customer purchases involves

Answer 3

Recording an expense and a liability each period

Question 4

Accounting for cost of incentive program for customer purchases

Answer 4

• Requires probability estimation
• Follows the matching principle
• ls a loss contingency situation

Question 5

Providing a monetary rebate program

Answer 5

• Is accounted for similarly to a premium offer
• Creates an expense for the seller in the period of sale.
• Creates a liability for the seller at the time of sale