Question

Blue Spruce Limited, a private company following ASPE, includes one coupon in each box of soap powder that it produces, and 8 coupons are redeemable for a premium (a kitchen utensil). In 2020, Blue Spruce Corporation purchased 8,610 premiums at $0.80 each and sold 99,200 boxes of soap powder at $3.40 per box. In total, 32,800 coupons were presented for redemption in 2020. It is estimated that 60% of the coupons will eventually be presented for redemption. Blue Spruce uses the expense approach to account for premiums.

Your answer is partially correct. Try again. Prepare all the entries that would be made for sales of soap powder and for the premium plan in 2020. Ignore any cost of goods sold entry. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit Inventory of Premiums T 6888 T 6888 TCash (To record cash purchase of premiums) TCash 337280 337280 T Sales Revenue (To record cash sales) Premium Expense 2624 2624 T Inventory of Premiums (To record redemption of coupons) Premium Expense 2137 2137 T Estimated Liability for (To record premium expense)

Answer 1

The following journal entries will be made:

Account Titles and Explanation	Debit	Credit
Inventory of Premiums	6888
Cash		6888
(To record cash purchase of premiums)
Cash	337280
Sales Revenues		337280
(To record cash sales)
Premium Expense [(32,800/8) x $0.80]	3280
Inventory of Premiums		3280
(To record redemption of coupons)
Premium Expense [(99,200 x 60%) - 32,800] x ($0.80/8)	2672
Estimated Liability for Premiums		2672
(To record premium expense)