An Electronics Store Is Running a Promotion Where for Every

Multiple Choice

An electronics store is running a promotion where for every video game purchased, the customer receives a coupon upon checkout to purchase a second game at a 50% discount. The coupons expire in one year. The store normally recognized a gross profit margin of 40% of the selling price on video games. How would the store account for a purchase using the discount coupon?

A) The reduction in sales price attributed to the coupon is recognized as premium expense.
B) The difference between the cost of the video game and the cash received is recognized as premium expense.
C) Premium expense is not recognized.
D) The difference between the cost of the video game and the selling price prior to the coupon is recognized as premium expense.