Question

Problem 13-13 To increase the sales of its Sugar Kids breakfast cereal, Whispering Winds Foods Limited places one coupon in each cereal box. Five coupons are redeemable for a premium consisting of a child's hand puppet. In 2017, Whispering Winds purchases 41,400 puppets at $1.65 each and sells 489,000 boxes of Sugar Kids at $3.05 a box. Whispering Winds estimates that $0.20 of the sale price relates to the hand puppet to be awarded. From its experience with other similar premium offers, whispering winds estimates that 40% of the coupons issued will be mailed back for redemption. During 2017, 115,500 coupons are presented for redemption. Whispering Winds is a private company following ASPE

Answer 1

Journal Entries when coupons are expense as they are redeemed.

1. To record purchase of puppets

Purchase account Debit $68310

Bank Account Credit $68310

2. To record sales of boxes

Customer Account Debit $1491450

Sales account Credit $1491450

3. To record Redemption

No coupon was redeemed, no entry

Journal Entries when coupons are expense as per estimation.

1. To record purchase of puppets

Purchase account Debit $68310

Bank Account Credit $68310

2. To record sales of boxes

Customer Account Debit $1491450

Sales account Credit $1491450

3. To record Redemption

Coupons expense Account Debit $9240

Coupon expense payable account Credit $9240

(115500*40% *$0.2)

Journal Entries when coupons are expense as per IFRS.

1. To record purchase of puppets

Purchase account Debit $68310

Bank Account Credit $68310

2. To record sales of boxes

Customer Account Debit $1491450

Sales account Credit $1491450

3. To record Redemption

Coupons expense Account Debit $9240

Coupon expense payable account Credit $9240

(115500*40% *$0.2)