Exhibit 13-3 Paul Company Includes Three Coupons in Each Package

Multiple Choice

Exhibit 13-3 Paul Company includes three coupons in each package of crackers it sells.In exchange for 20 coupons, a customer will receive a cheese plate.Paul estimates that 30% of the coupons will be redeemed.In 2010, Paul sold 4, 000, 000 boxes of crackers and purchased 150, 000 cheese plates at $2.50 each.During the year, 970, 000 coupons were redeemed.
-
Refer to Exhibit 13-3.What amount should Paul record as premium expense for 2010?

A) $121, 250
B) $450, 000
C) $375, 000
D) $500, 000