Cullumber Corporation sold Sugar Frosted Cocoa Bombs, a children’s breakfast cereal. As a promotion, Cullumber offered its customers a free music CD in exchange for 4 boxtops, plus $3.10 to cover postage and handling. The CD cost Cullumber $3.35, and postage costs to mail the CDs out to customers were $2.50. Cullumber estimated that 80% of its customers would redeem boxtops. Cullumber purchased 10,800 CDs at the start of the promotion in November, 2020. 125,000 boxes of cereal were sold during November and December, 2020, and Cullumber’s year-end was December 31. Prior to the end of the fiscal year, 6,400 customers took advantage of the offer, which continued until February, 2021. Cullumber follows ASPE and uses the expense approach to account for its premiums.
1)Journal entry for purchase of promotional CD-
Total CD bought=10800
Cost Per CD=$3.35
Total Cost=10800*3.35
=$36180
Debit Credit
Inventory of premiums A/C 36180
cash 36180
2)6400 customer Redeemed=6400*3.35=$21440
post and handelling recovered from customer=6400*$3.10=19840
Post and handelling expenses=6400*2.50=16000
Debit credit
Cash 17600
Premium Income 19840
Premium Expense 16000
Inventory of Premiums 21440
3)As company estimates that 80% would redeem boxtops
Total cereals sold=125000boxes*80%
=100000
A CD is given as free for every 4 boxes,so total CD required=100000/4
=25000
CD already bought=10800
Estimated CD to be bought=25000-10800
=14200 pc
Total Cost to buy CD=Total NUmber of CD*Cost per CD
=14200*3.35
=$47570
Debit Credit
Premium Expense 47570
Estimated liability for Premiums 47570
Cullumber Corporation sold Sugar Frosted Cocoa Bombs, a children’s breakfast cereal. As a promotion, Cullumber offered...
Martinez Corporation sold Sugar Frosted Cocoa Bombs, a children's breakfast cereal. As a promotion, Martinez offered its customers a free music CD in exchange for 4 boxtops, plus $3.00 to cover postage and handling. The CD cost Martinez $3.25, and postage costs to mail the CDs out to customers were $2.50. Martinez estimated that 70% of its customers would redeem boxtops. Martinez purchased 11,000 CDs at the start of the promotion in November, 2020. 120,000 boxes of cereal were sold...
Martinez Corporation sold Sugar Frosted Cocoa Bombs, a children's breakfast cereal. As a promotion, Martinez offered its customers a free music CD in exchange for 4 boxtops, plus $3.00 to cover postage and handling. The CD cost Martinez $3.25, and postage costs to mail the CDs out to customers were $2.50. Martinez estimated that 70% of its customers would redeem boxtops. Martinez purchased 11,000 CDs at the start of the promotion in November, 2020. 120,000 boxes of cereal were sold...
Can you help us with part b and part c? the
remaining 2 journal entries
2.73/3.5 Question 2 View Policies Show Attempt History Current Attempt in Progress Martinez Corporation sold Sugar Frosted Cocoa Bombs, a children's breakfast cereal. As a promotion, Martinez offered its customers a free music CD in exchange for 4 boxtops, plus $3.00 to cover postage and handling. The CD cost Martinez $3.25, and postage costs to mail the CDs out to customers were $2.50. Martinez estimated...
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