Business, 13.03.2020 19:04 harveyangel123p2tjae

Dunn Trading Stamp Company records stamp service revenue and provides for the cost of redemptions in the year the stamps are sold to licensees. Dunn's past experience indicates that only 75% of the stamps sold to licensees will be redeemed. Dunn's liability for stamp redemptions was $6,000,000 at December 31, Year 3. Additional information for Year 4 is as follows: Stamp service revenue from stamps sold to licensees $4,000,000 Cost of redemptions (stamps sold prior to 1/1/Year 4) $2,750,000 If all the stamps sold in Year 4 were presented for redemption in Year 5, the redemption cost would be: $2,250,000 Required: What amount should Dunn report as a liability for stamp redemptions at December 31, Year 4.

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Dunn Trading Stamp Company records stamp service revenue and provides for the cost of redemptions in...