Create an Account

Already have account?

Forgot Your Password ?

Home / Questions / Problem 13-9 Cheyenne Company offers an MP3 download (seven-single medley) as a premium for every 5

Problem 13-9 Cheyenne Company offers an MP3 download (seven-single medley) as a premium for every 5

Problem 13-9
Cheyenne Company offers an MP3 download (seven-single medley) as a premium for every 5 candy bar wrappers presented by customers together with $3.50. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each download code to the company is $3.25. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2017 and 2018 are as follows. (All purchases and sales are for cash.)

2017
2018
MP3 codes purchased 360,000 475,200
Candy bars sold 2,825,000 2,546,500
Wrappers redeemed 1,728,000 2,160,000
2017 wrappers expected to be redeemed in 2018 417,600
2018 wrappers expected to be redeemed in 2019 504,000



Prepare the journal entries that should be made in 2017 and 2018 to record the transactions related to the premium plan of the Cheyenne Company. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 1,525.)

Account Titles and Explanation
Debit
Credit
2017

Inventory of Premiums

 

Cash


(To record the premium inventory.)

Cash

 

Sales Revenue


(To record the sales.)

Cash

 

Premium Expense

 

Inventory of Premiums


(To record the expense associated with the sale.)

Premium Expense

 

Premium Liability


(To record the premium liability.)
2018

Inventory of Premiums

 

Cash


(To record the premium inventory.)

Cash

 

Sales Revenue


(To record the sales.)

 

 

 

 

 


(To record the expense associated with the sale.)

 

 


(To record the premium liability.)

SHOW LIST OF ACCOUNTS
LINK TO TEXT
LINK TO TEXT



Indicate the amounts for each accounts, and classifications of the items related to the premium plan that would appear on the balance sheet and the income statement at the end of 2017 and 2018.

Amount
Account
2017
2018
Classification
Inventory of Premiums $
$

Premium Liability


Premium Expense

 

 

Sep 12 2020 View more View Less

Answer (Solved)

question Subscribe To Get Solution

Related Questions