Question

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.

On December 1, 2016, Insto Photo Company purchased merchandise, invoice price $23,000, and issued a 6%, 120-day note to Ringo Chemicals Company. Insto uses the calendar year as its fiscal year and uses the perpetual inventory system.

	Prepare journal entries on Insto’s books to record the preceding information, including the adjusting entry at the end of the year and payment of the note at maturity.

Answer 1

Solution :-

Question -1 :-

1 :-

In both conditions :-

Account titles and explanations	Debit	Credit
Promotional expenses [ 5,000,000 * 20% * ( $5 / 10 ) ]	$500,000
Promotional expenses payable		$500,000
( To record the arrangement of special costs )
Promotional expenses payable [ 800,000 * ( $5 / 10 ) ]	$400,000
Cash		$400,000
(To record the money installments of special costs )

2 :-

	Account titles and explanations	Debit	Credit
Condition 1 :	Promotional expenses payable [ 150,000 * ( $5/10 ) ]	$75,000
	Cash		$75,000
	(To record the money installments of special costs )
Condition 2 :	Promotional expenses  [ 150,000 * ( $5/10 ) ]	$75,000
	Promotional expenses payable		$75,000
	( To record the extra arrangement of special costs )
	Promotional expenses  [ 300,000 * ( $5/10 ) ]	$150,000
	Cash		$150,000
	(To record the money installments of special costs )

Question -2 :-

Date	Account titles and explanations	Debit	Credit
December 1 , 2016	Inventory	$23,000
	Notes Payable		$23,000
December 31 , 2016	Interest Expense [  $23,000 * 6% * ( 30 / 300 ) ]	$115
	Interest Payable		$115
April 1 , 2017	Interest Expense [  $23,000 * 6% * ( 90 / 300 ) ]	$345
	Interest Payable	$115
	Notes Payable	$23,000
	Cash [ $345 + $115 + $23,000 ]		$23,460