Question

Exercise 13-12 Carla Company includes 1 coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2017, Carla Company purchased 8,000 premiums at 85 cents each and sold 100,000 boxes of soap powder at $3.40 per box; 45,400 coupons were presented for redemption in 2017. 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 2017. (If no entry is required, select "No Entry" for the account titles and enter 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)

Answer 1

Account Title and Explanation	Debit	Credit
Inventory premium	6,800
Cash (8,000 x $0.85)		6,800
(To record the premium inventory)
Cash	340,000
Sales		340,000
(To record the sales) (100,000 x $3.40)
Premium Expense	3,859
Inventory premium (45,400/10) x 0.85		3,859
(To record the expense associated with the sale)
Premium Expense [(100,000 x 60%) - 45,400]/10 x 0.85	1,241
Estimated Liabilities premium		1,241
(To record the premium liability)