Question

Exercise 13-12 Pearl Company includes one coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2020, Pearl Company purchased 8,600 premiums at 75 cents each and sold 108,000 boxes of soap powder at $3.60 per box; 40,000 coupons were presented for redemption in 2020. It is estimated that 60% of the coupons will eventually be presented for redemption. Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2020. (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.) Account Titles and Explanation Debit Credit (To record the premium inventory) (To record the sales) (To record the expense associated with the sale) (To record the premium liability)

Answer 1

Answer Credit Journal Entry Accounts Title and Explanation 1 Inventory Premiums Cash (8,600 x $0.75) (To record the premium inventory) Debit $6,450 $6,450 $388,800 2 Cash Sales (108,000 x $3.60) (To record the Sales) $388,800 $3,000 3 Premium Expense [(40,000 / 10) < $0.75] Inventory Premiums (To record the expense associated with the sale) $3,000 $1,860 4 Premium Expense [(108,000 x 60% - 40,000) / 10 x $0.75] Estimated Liability Premiums (To record the premium liability) $1,860