Question

To stimulate the sales of its Alladin breakfast cereal, Indigo Company places 1 coupon in each box. 5 coupons are redeemable for a premium consisting of a children’s hand puppet. In 2018, the company purchases 44,300 puppets at $1.55 each and sells 484,500 boxes of Alladin at $3.80 a box. From its experience with other similar premium offers, the company estimates that 40% of the coupons issued will be mailed back for redemption. During 2018, 148,500 coupons are presented for redemption.

Prepare the journal entries that should be recorded in 2018 relative to the premium plan. (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. Round answers to 0 decimal places, e.g. 1,525.)

(To record the premium inventory.):

account title and explanation	debit	credit

(To record the sales.):

account title and explanation	debit	credit

(To record the expense associated with the sale.)

account title and explanation	debit	credit

(To record the premium liability.)

account title and explanation	debit	credit

Answer 1

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