In: Accounting
On January 1, 2017, Fro-Yo Inc. began offering customers a cash rebate of $5.00 if the customer mails in 10 proof-of-purchase labels from its frozen yogurt containers. Based on historical experience, the company estimates that 20% of the labels will be redeemed. During 2017, the company sold 5,000,000 frozen yogurt containers at $1, cash, per container. From these sales, 800,000 labels were redeemed in 2017, 150,000 labels were redeemed in 2018, and the remaining labels were never redeemed.
Required:
1. | Prepare the journal entries related to the sale of frozen yogurt and the cash rebate offer for 2017 and 2018. |
2. | Next Level Assume that 300,000 labels were redeemed in 2018. Prepare the journal entries related to the cash rebate offer for 2018. |
CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fro-Yo Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Prepare the necessary journal entries to record:
1. the sale of Fro-Yo containers for cash during 2017 | |
2. the redemption of labels during 2017 | |
3. the redemption of labels during 2018 | |
4. the recognition of the unredeemed labels at the end of 2018 | |
Additional Instructions |
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GENERAL JOURNAL
DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
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Next Level
Assume that 300,000 labels were redeemed in 2018. Prepare the journal entries related to the cash rebate offer for 2018.
PAGE 9
GENERAL JOURNAL
DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
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1 |
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2 |
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3 |
Cash rebate per yogurt | = | 5 for 10 yogurt label, so 0.5 for per yogurt label | ||||||
Date | Account Title & Explanation | Debit | Credit | |||||
Amount in | Amount in | |||||||
2017 | Promotional expenses | 500000 | =5000000*20%*0.5 | |||||
Promotional expense Payable | 500000 | |||||||
To record the provision of promotional expenses | ||||||||
Promotional expense Payable | 400000 | =800000*0.5 | ||||||
Cash | 400000 | |||||||
To record the cash payment of promotinal expense | ||||||||
situation 1 | ||||||||
2018 | Promotional expense Payable | 75000 | =150000*0.5 | |||||
Cash | 75000 | |||||||
To record the cash payment of promotinal expense | ||||||||
2018 | Promotional expense Payable | 25000 | =50000*0.5 | |||||
Promotional expenses | 25000 | |||||||
situation 2 | ||||||||
2018 Revised | Promotional expenses | 50000 | =100000*0.5 | |||||
Promotional expense Payable | 50000 | |||||||
To record the additional provision for promotion expenses | ||||||||
Promotional expense Payable | 150000 | =300000*0.5 | ||||||
Cash | 150000 | |||||||
To record the cash payment of promotinal expense | ||||||||