Exhibit 9-3 John Company Includes Three Coupons in Each Package

Multiple Choice

Exhibit 9-3 John Company includes three coupons in each package of cookies it sells. In exchange for 20 coupons, a customer will receive a cookie sheet. John estimates that 30% of the coupons will be redeemed. In 2014, John sold 4,000,000 boxes of cookies and purchased 150,000 Cookie sheets at $2.50 each. During the year, 970,000 coupons were redeemed.

-Refer to Exhibit 9-3. What amount should John record as premium expense for 2014?

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