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 |
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