Question

Evans Candy Company offers a coffee mug as a premium for every ten 50-cent candy bar wrappers presented by customers together with $1.00. The purchase price of each mug to the company is 90 cents; in addition it costs 60 cents to mail each mug. The results of the premium plan for the years 2016 and 2017 are as follows (assume all purchases and sales are for cash):

                                                                                                             

	2016	2017
Coffee mugs purchased	720,000	800,000
Candy bars sold	5,600,000	6,750,000
Wrappers redeemed	2,800,000	4,200,000
2016 wrappers expected to be redeemed in 2017	2,000,000
2017 wrappers expected to be redeemed in 2018		2,700,000

Required:

Prepare the general journal entries that should be made in 2016 and 2017 related to the above plan by Evans Candy.

Answer 1