Question

roblem 4 (Pro em 4 (Premium Entries and Financial Statement Presentation) Scamore Candy Company offers an MP3 downlond (seven-single medley) as a premium for every five candy war wrappers presented by customers together with $2.50. 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 $2.25. In addition, it costs 30 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 250,000 330,000 Candy bars sold 2,895,400 2,743,600 Wrappers redeemed 1,200,000 1,500,000 2017 wrappers expected to be redeemed in 2018 290,000 2018 wrappers expected to be redeemed in 2019 350,000 Instructions (a) Prepare the journal entries that should be made in 2017 and 2018 to record the transactions related to the premium plan of the Sycamore Candy Company.

Answer 1

Date	Account titles and explanation	Debit	Credit
2017	Inventory of Premium MP3 (250000*2.25)	562500
	Cash		562500
	Cash (2895400*0.30)	868620
	Sales		868620
	Cash	480000
	Premium Expense (540000+(240000*0.50))-(24000*2.50)	60000
	Inventory of Premium MP3 (240000*2.25)		540000
	Premium Expense	14500
	Premium Liability (290000/5)*(2.25+0.50-2.50)		14500
2018	Inventory of Premium MP3 (330000*2.25)	742500
	Cash		742500
	Cash (2743600*0.30)	823080
	Sales		823080
	Cash (300000*(2.50-0.50)	6000000
	Premium liability	14500
	Premium Expense	60500
	Inventory of Premium MP3 (300000*2.25)		675000
	Premium Expense (350000/5)*(2.25+0.50-2.50)	17500
	Premium Liability		17500