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Financial accounting question In each box of chocolate thai it produces ABC inc includes a special...
Financial accounting question
In each box of chocolate thai it produces ABC inc includes a special coupon. The purchaser may redeem 10 coupons for a mix bowl (premium)
Each bowl costs ABC inc $0.90.
During 2017, ABC inc purchased 6000 mix bowls and sold 200000 boxes of chocolate at $3.50 per box. Based on past experience, ABC inc estimates 60% of the coupons will be redeemed. 45000 coupons were presented for redemption.
During 2018, 8000 mix bowls were purchased. As well ABC sold 300000 boxes of chocolate at $3.75 per box, and 90000 coupons were presented for redemption.
Question# 1
All the journal entries that would be made regarding the chocolate sales and the premium plan in 2017 and 2018.
Solutions
Expert Solution
| Date | Account Titles and Explanation | Debit | Credit |
| 2017 | |||
| 1 | Premium inventory (6000 x $0.90) | 5400 | |
| Cash/Accounts payable | 5400 | ||
| (To record premium inventory of bowls purchased) | |||
| 2 | Cash/Accounts receivable | 700000 | |
| Sales revenue (200000 x $3.50) | 700000 | ||
| (To record sales of chocolate boxes) | |||
| 3 | Premium expense (200000 x 60% x 1/10 x $0.90) | 10800 | |
| Premium liability | 10800 | ||
| (To record premium expense accrued on boxes sold) | |||
| 4 | Premium liability (45000 x 1/10 x $0.90) | 4050 | |
| Premium inventory | 4050 | ||
| (To record coupons redeemed) | |||
| 2018 | |||
| 1 | Premium inventory (8000 x $0.90) | 7200 | |
| Cash/Accounts payable | 7200 | ||
| (To record premium inventory of bowls purchased) | |||
| 2 | Cash/Accounts receivable | 1125000 | |
| Sales revenue (300000 x $3.75) | 1125000 | ||
| (To record sales of chocolate boxes) | |||
| 3 | Premium expense (300000 x 60% x 1/10 x $0.90) | 16200 | |
| Premium liability | 16200 | ||
| (To record premium expense accrued on boxes sold) | |||
| 4 | Premium liability (90000 x 1/10 x $0.90) | 8100 | |
| Premium inventory | 8100 | ||
| (To record coupons redeemed) |
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