Problem 155 Prepare the general journal entries that should be made in 2017 and
ID: 2537885 • Letter: P
Question
Problem 155
Prepare the general journal entries that should be made in 2017 and 2018 related to the above plan by Kane Candy.
Problem 155
Kane Candy Company offers a coffee mug as a premium for every ten $1 candy bar wrappers presented by customers together with $2. The purchase price of each mug to the company is $2.4; in addition it costs $1.6 to mail each mug. The results of the premium plan for the years 2017 and 2018 are as follows (assume all purchases and sales are for cash):2017 2018 Coffee mugs purchased 720,000 800,000 Candy bars sold 5,600,000 6,750,000 Wrappers redeemed 2,800,000 4,200,000 2017 wrappers expected to be redeemed in 2018 2,000,000 2018 wrappers expected to be redeemed in 2019 2,700,000
Explanation / Answer
Purchase Price 2.4 Mail Cost 1.6 Year Accounts Debit Credit 2014 Inventory Mugs 1728000 Cash 1728000 (720000*2.4) 2014 Cash 5600000 Sales Revenue 5600000 (5600000*1) 2014 Cash 112000 Expense-Premium 560000 Inventory of Mugs 672000 (2800000/10)*(2-1.6) (280000*2.4) 2014 Expense-Premium 200000 Lianbility-Premium 200000 (2000000/10)*(1) 2015 Inventory Mugs 1920000 Cash 1920000 (800000*2.4) 2015 Cash 6750000 Sales Revenue 6750000 (6750000*1) 2015 Cash 168000 Expense-Premium 388000 Liability-Premium 200000 Inventory of Mugs 756000 (4200000/10)*(2-1.6) (420000*1.8) Expense-Premium 270000 Lianbility-Premium 270000 (2700000/10)*(1)