On January 1, 2017, Sweet Treats Inc. began offering customers a cash rebate of
ID: 2523329 • Letter: O
Question
On January 1, 2017, Sweet Treats Inc. began offering customers a cash rebate of $4.00 if the customer mails in 5 proof-of-purchase labels from its boxes (there is one label in each box). Based on historical experience, the company estimates that 30% of the labels will be redeemed. During 2017, the company sold 6,000,000 boxes at $2 per box. From these sales, 900,000 labels were redeemed in 2017, 750,000 labels were redeemed in 2018, and the remaining labels were never redeemed.
Required: 1. Prepare the journal entries related to the sale of the Sweet Treats boxes and the cash rebate offer for 2017 and 2018.
Explanation / Answer
2017 Debit Credit
Bank 1,200,0000
Sales ------------ 1,200,0000
(Sales of 60,00,000 boxes at 2 each)
Rebate 3,600,000
To Bank 3,600,000
(Rebate on 900000 labels at $ 4)
2018
Rebate 3,000,000
To Bank 3,000,000
(Rebate on 750000 labels at $ 4)