Question

Bonita Company offers an MP3 download (seven-single medley) as a premium for every 5 candy bar wrappers presented by customers together with S3.30. The candy bars are sold by the company to distributors for 30 cents each. The purchase price company is $3.05. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2017 and 2018 are as follows. (All purchases and sales are for cash.) of each download code to the (To record the premium inventory.) 2017 2018 MP3 codes purchaseo Candy bars sold Wrappers redeemed 2017 wrappers expected to be redeemed in 2018 2018 wrappers expected to be redeemed in 2019 340,000 448,800 2,565,300 2,676,500 1,632,000 2,010,000 To record the saks.) 394,400 476,000 To record th e expense associated with the sale.) Prepare the journal entries that should be made in 2017 and 2018 to record the transactions related to the premium plan of the Bonita Company. (If no entry is required, select "No Entry for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually, Round answers to 0 decimal places, e.g. 1,525.) To record the premium liability.) Account Titles and Explanation Debit Credit 2017 (To record the premium inventory.) (To record the sales.) (To record the expense associated with the sale.) (To record the premium liability.) 2018

Answer 1

Premium expense for 2017: 326400

Mp3(1632000/5)=

Cost to purchase codes(326400× $3.05)= 995520

Distribution cost(326400*.50) 163200

Total cost= 1158720

Less cash received(326400×$3.30)= 1077120

Premium expense= 81600

Account titles and explanation Debit Credit

2017 Invntory of premium(340000×$3.05) $1,037,000

Cash $1,037,000

(To record the premium inventory)

Cash(2665300×$.30) $799,590

Sales revenue $799,590

(To record the sales)

Cash(1077120-163200) $913,920

Premium expense $81,600

Inventory of premium $995,520

(To record the expense associated with sale)

Premium expense(394400/5)*(3.05+.50-3.30) $3,944

Premium liability $3,944

(To record the premium liability)

Account titles and explanation Debit Credit

2018 Inventory of premium(448800*3.05) $1,368,840

Cash $1,368,840

(To record the premium inventory)

Cash(2,676,600×$.30) $802,980

Sales revenue $802,980

(To record the sales)

Cash(1346,400-204,000) $1,142,400

Premium expense $102,000

Premium Liability $3,944

Inventory of premium $1,248,344

(To record the expense associated with sale)

Premium expense(476000/5)*(3.05+.50-3.30) $4,760

Premium liability $4,760

(To record the premium liability)

Premium expense for 2018:

Mp3(2040000/5) 408000

Cost to purchase codes(408000*3.05) 1244400

Distribution cost(408000*.5) 204000

Total cost= 1448400

Less cash received(408000×$3.30)= 1346400

Premium expense= 102000