Problem 13-8 To stimulate the sales of its Alladin breakfast cereal, Culver Comp
ID: 2557962 • Letter: P
Question
Problem 13-8 To stimulate the sales of its Alladin breakfast cereal, Culver Company places 1 coupon in each box. 6 coupons are redeemable for a premium consisting of a children's hand puppet. In 2018, the company purchases 45,700 puppets at $1.55 each and sells 589,200 boxes of Alladin at $3.80 a box. From its experience with other similar premium offers, the company estimates that 40% of the coupons issued will be mailed back for redemption. During 2018, 156,000 coupons are presented for redemption. Prepare the journal entries that should be recorded in 2018 relative to the premium plan. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 1,525.) Account Titles and Explanation Debit Credit 70835 Cash 70835 (To record the premium inventory.) 223896 223896 Sales Revenue To record the sales.) Premium Expense 40300 Inventory of Premiums (To record the expense associated with the sale.) Premium Expense 40300 Premium Liability To record the premium liability.)Explanation / Answer
Accounts Titles & Explanation Debit ($) Credit ($) Inventory of premiums [ 45,700 * $1.55 ] 70,335 Cash 70,335 [ To record premium inventory ] Cash [589,200 * $3.80] 2,238,960 Sales revenue 2,238,960 [ To record the sales ] Premium Expense [ (156,000 / 6) * $1.55 ] 48,300 Inventory of premiums 48,300 [ To record expense associated with sale ] Premium Expense 24,701 Premium Liability [ {(589,200 * 40 % - 156,000 ) / 5 } * $1.55 ] 24,701 [ To record premium liabilty ]