Question

Crane Candy Company offers a coffee mug as a premium for every ten $1 candy bar wrappers presented by customers together with $2. The purchase price of each mug to the company is $2.40; in addition it costs $1.60 to mail each mug. The results of the premium plan for the years 2020 and 2021 are as follows (assume all purchases and sales are for cash):

		2020		2021
Coffee mugs purchased		700,000		810,000
Candy bars sold		5,700,000		6,800,000
Wrappers redeemed		2,600,000		4,250,000
2020 wrappers expected to be redeemed in 2021		1,900,000
2021 wrappers expected to be redeemed in 2022				2,690,000

Part 1

Prepare the general journal entries that should be made in 2020 and 2021 related to the above plan by Crane Candy. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
2020
	(To record purchase of coffee mugs)
2020
	(To record sale of candy bars)
2020
	(To record coffee mugs offered for wrappers redeemed)
2020
	(To record liability against expected redemption of wrappers)
2021
	(To record purchase of coffee mugs)
2021
	(To record sale of candy bars)
2021
	(To record coffee mugs offered for wrappers redeemed)
2021
	(To record liability against expected redemption of wrappers)

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Part 2

Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the Crane Candy Company balance sheet and income statement at the end of 2020 and 2021.

Balance Sheet

Account Name		Class		2020		2021
		Operating IncomeOperating ExpenseCurrent LiabilityCurrent Asset		$		$
		Operating IncomeOperating ExpenseCurrent AssetCurrent Liability		$		$

Income Statement

Account Name		Class		2020		2021
		Operating IncomeCurrent LiabilityCurrent AssetOperating Expense		$		$

Answer 1

Answer Page: No SNO Date 2 2020 2600,000 10 2020 10 2600,000 10 x 2.40 0 Journal entries Particular Debit Credit 1 | 2000 | Inventory of premiums $1,680,000 Cash (100,000 x$2.40) $1,680,000 Cash $5,400,000 Sales revenue $5,700,000 Cash (+3–41-60)+104,000 Poseroyum expense (3600000Q (2.4+1-6-2)) $520,000 Inventory of premiums were $624000 Premium expense (1920 Premium liability $380,000 19, 20) Inventory of premiumb (810,000x2.)$1,944,000 Cash $1,944,000 cash 146,800,000 Sales revenue $6,800,000 cash (435000 Ox(2-1-6)) $170,000 Premium liabilily $380,000 Premium expersse (4250,000 – 1900 $ 470,000 Inventory of premium (1250000 x 2.4) $1,020,000 1900,000 2020 **(24+16)* 380,000 -2/ 16, 2021 20221 X (1.6+214-21

Page in NO (2) Premium expers (2690,000 $(2.4+)$538,000 18 2021 1:6-2)/ Premium liability $538,000 @ Inventory of premiums 2020 - current assets 1,680,000 624000 = $1,056,000 2031- current assels = 1,944,000 + (1,056,000 - 1,020,000 $1,980,000 Premium liabilia 2020 - Current liabililing $ 380,000 2001 - current liability $538,000 Premium e expense 2030 - Selling expenses 2001- Selling expenses 520,000 + 380,000 – $900,000 470,000 + 538,000 = $1,008,000 2020 classification Particular 2021 Inventory of premium Balance sheet - correstente $1056,000 $1,980,000 Premium liabilily Balance sheet - Corrent liability $ 380,000 $538,000 Premium expense Income statement- $900,000 $1,008,000 Selling expense