Duke Trading Stamp Co. records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Duke’s past experience indicates that only 80% of the stamps sold to licensees will be redeemed.

Duke Trading Stamp Co. records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Duke’s past experience indicates that only 80% of the stamps sold to licensees will be redeemed.

Duke Trading Stamp Co. records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Duke’s past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Duke’s liability for stamp redemptions was $7,500,000 at December 31, 2011. Additional information for 2012 is as follows:

Stamp service revenue from stamps sold to licensees $5,000,000

Cost of redemptions $3,400,000

If all the stamps sold in 2012 were presented for redemption in 2013, the redemption cost would be $2,500,000. What amount should Duke report as a liability for stamp redemptions at December 31, 2012?


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