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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)

ekkarill92 answered 2 years ago
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