Question

Sweet Dates Company offers a premium to its customers—a glass bowl (cost to Sweet Dates is $0.90) upon return of 40 coupons. Two coupons are placed in each box of dates sold. The company estimates, on the basis of past experience, that only 70% of the coupons will ever be redeemed. During 2016, 10 million boxes of dates are sold, for cash, at $0.30 each. Eight million coupons are redeemed during 2016. Sweet Dates purchased 360,000 glass bowls for the plan on January 1, 2016.

1.	Prepare the journal entries related to the sale of dates and the premium plan in 2016.
2.	Show how the preceding items would be reported on the December 31, 2016, balance sheet.

q2

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.

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.

Answer 1

Answer of question number 1

Date	Account title	Post ref	Debit	Credit
Jan1	Premium Expenses Account		324000
	To Cash Account			324000
	(Glass bowl purchased as premium)
-	Cash Account		3000000
	To Sales Account			3000000
	(Cash sales made)
-	Premium Expenses Account	315000
	To Liability for premium Account(WN1)		315000
	(Liability for premium created at the time of sale)
-	Liability for premium Account		180000
	To Premium Expenses Account(WN2)			180000
	(Premium redeemed)

WN1

Units sold 10000000

Coupon/unit 2

Total no. Of coupons 10000000*2=20000000

Coupon redeemable per premium(bowl) 40

No. Of bowls= 20000000/40=500000

Redeemable =5000000*70%=350000

Premium liability to be created at the time of sale=350000*0.9=315000

WN 2

Premium redeemed (8000000÷40)*.9=180000

SWEET DATES COMPANY LIMITED PPARTIAL BALANCE SHEET AS ON December 31 2016
CURRENT ASSETS
CASH (3000000-324000)	2676000
PREMIUM EXPENSES(315000-180000)	135000
CURRENT LIABILITIES
LIABILITY FOR PREMIUM	135000

Answer of question number 2

Cash rebate per yogurt	=	$5 for 10 ygurt label, so $0.5 for per yogurt label
	Date	Account Title & Explanation		Debit	Credit
				Amount in $	Amount in $
Same entry in both situation	2017	Promotional expenses		500000			=5000000*20%*0.5
			Promotional expense Payable		500000
		To record the provision of promotional expenses
Same entry in both situation		Promotional expense Payable		400000
			Cash		400000
		To record the cash payment of promotinal expense
situation 1
	2018	Promotional expense Payable		75000
			Cash		75000
		To record the cash payment of promotinal expense
situation 2
	2018 Revised	Promotional expenses		75000
			Promotional expense Payable		75000
		To record the additional provision for promotion expenses
		Promotional expense Payable		150000
			Cash		150000
		To record the cash payment of promotinal expense