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The Happy Cereal Company includes a premium in each box of its cereal. For four...

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Accounting

The Happy Cereal Company includes a premium in each box of its cereal. For four premiums plus $2.00, customers are entitled to a plastic wiggle worm that costs Happy $4.50 each. Happy expects 60% of the premiums to be redeemed. In 2016, Happy sold 500,000 boxes of cereal and distributed 25,000 wiggle worms. Refer to Exhibit 9-1. What is Happy's estimated liability for unredeemed premiums on December 31, 2016? $337,500 $225,000 $187,500 $125,000

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