Question

Nash Company includes one coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2020, Nash Company purchased 8,000 premiums at 75 cents each and sold 105,000 boxes of soap powder at $3.20 per box; 41,000 coupons were presented for redemption in 2020. It is estimated that 60% of the coupons will eventually be presented for redemption. Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2020. (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.) Account Titles and Explanation Debit Credit

Answer 1

Ans:

S.No	Account Titles & Explanation	Debit	Credit
1	Inventory Premiums   (8000 * 0.75)	$         6000
	Cash		$         6000
	(To record the premium inventory)
2	Cash    (105000 * 3.20)	$     336,000
	Sales		$     336,000
	(To record the sales)
3	Premium Expense   (41000/10) * 0.75	$         3,075
	Inventory Premium		$         3,075
	(To record the expense associated with the sales)
4	Premium Expense (105000 * 60%) – 41000) / 10 * 0.75	$         1,650
	Estimated Liability Premiums		$         1,650
	(To record the premium liability)

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