PLEASE CORRECT THE RED BOXES Problem 139 Whispering Company

PLEASE CORRECT THE RED BOXES

Problem 13-9 Whispering Company offers an MP3 download (seven-single medley) as a premium for every 6 candy bar wrappers presented by customers together with $2.80. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each download code to the company is $2.55. 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.) 2017 2018 MP3 codes purchased 390,000 514,800 Candy bars sold 2,809,900 2,574,700 Wrappers redeemed 1,872,000 2,340,000 2017 wrappers expected to be redeemed in 2018 452,400 2018 wrappers expected to be redeemed in 2019 546,000 Prepare the journal entries that should be made in 2017 and 2018 to record the transactions related to the premium plan of the Whispering Company. Iccount titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent man 1,525.) 2018 Account Titles and Explanation Debit Credit 2017 |Inventory of Premiums Inventory of Premiums 94500 Cash Cash 94500 (To record the premium inventory.) (To record the premium inventory.) Cash Sales Revenue 772410 Sales Revenue po (To record the sales.) (To record the sales.) Cash 897000 Cash Premium Liability 18850 Premium Expense |Premium Expense 78650 Inventory of Premiums 994500 (To record the expense associated with the sale.) Inventory of Premiums (To record the expense associated with the sale.) Premium Expense Premium Expense Premium Liability Premium Liability To record the premium liability.) (To record the premium liability.) Indicate the amounts for each accounts, and classifications of the items related to the premium plan that would appear on the balance sheet and the income statement at the end of 2017 and 2018. Amount Account 2017 2018 Classification Inventory of Premiums 1312740 Current Asset Premium Liability | 1885022750Current Liability Current Liability | 96850 Premium Expense 96850 Selling Expense

Solution

All the journal entries recorded above are correct.

For the year 2018

Balance of\" Inventory of Premiums\" is calculated by

Journal entry 1- Journal entry 3

=1312740-994500=318240

Balance of \" Premium Expense\"

Journal entry 3+ journal entry 4

=78650+22750=101400

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