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CALCULATOR PRINTER VERSION BACK Problem 13-09 (Part Level Submission) Monty offers an MP3 download (seven-single medley) as a
CALCULATOR PRINTER VERSIO! MP3 codes purchased Candy bars sold Wrappers redeemed 2020 wrappers expected to be redeemed in 202
Accounting, 17e Help System Announcements 2021 CALCULATOR PRIA Inventory of Premiums Cash (To record the premium inventory.)
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Answer #1

Solution

Premium expense for 2020:

Mp3(1,728,000/5)=345,600

Cost to purchase codes(345,600× $3.25)=$1,123,200

Distribution cost(345,600×.50=$172,800

Total cost=$1,296,000

Less cash received(345,600×$3.5)=(1,209,600)

Premium expense=$86,400

Account titles and explanation Debit Credit
2020 Inventory of premium(360,000×$3.75) $1,170,000
Cash $1,170,000
(To record the premium inventory)
Cash(2,825,000×$.30) $847,500
Sales revenue $847,500
(To record the sales)
Cash(1,209,600-172,800) $1,036,800
Premium expense $86,400
Inventory of premium $1,123,200
(To record the expense associated with sale)
Premium expense(417,600/5)×(3.25+.50-3.5) $20,880
Premium liability $20,880
(To record the premium liability)
Account titles and explanation Debit Credit
2021 Inventory of premium(475,000×$3.25) $1,543,750
Cash $1,543,750
(To record the premium inventory)
Cash(2,546,500×$.30) $763,950
Sales revenue $763,950
(To record the sales)
Cash(1,512,000-216,000) $1,296,000
Premium expense $87,120
Premium Liability $20,880
Inventory of premium $1,404,000
(To record the expense associated with the sale)
Premium expense (540,000/5)×(3.25+.50-3.5) $27,000
Premium liability $27,000
(To record the premium liability)

Premium expense for 2021:

Mp3(2,160,000/6)=432,000

Cost to purchase codes(432,000 × $3.25)=$1,404,000

Distribution cost(432,000 ×.50=$216,000

Total cost=$1,620,000

Less cash received(432,000 ×$3.5)=(1,512,000)

Premium expense=$87,120 (108,000-20,880)

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