E-Z Electronics Is Running a Video Game Promotion

Multiple Choice

E-Z Electronics is running a video game promotion.For every 10 video games purchased,the customer receives a coupon upon checkout to receive a free game.The coupons expire in one year.E-Z estimates that about half of its video game customers will qualify to receive a coupon.In the past,the store has recognized a gross profit margin of 40% of the selling price on video games.How would the store determine the dollar amount of the adjusting entry to record premium expense and the related contingent liability?

A) 5% of total video game sales
B) 3% of total video game sales
C) 2) 5% of total video game sales
D) 2% of total video game sales