Question

To increase the sales of its YurgPow, a carbonated yoghurt drink, ZOWIE Foods Ltd places one coupon on the side of each carton. Three coupons are redeemable for a premium consisting of an adorable goat stuffed toy. In late 2019, ZOWIE purchases 40,000 toys at $1.80 each (which was recorded with a debit to “Premium Inventory”) In 2020, the company sells 450,000 boxes of YurgPow at $6 a carton. From its experience with other similar premium offers, ZOWIE estimates that 50% of the coupons issued will be mailed back for redemption. During 2020, 9,000, coupons are presented for redemption.

Instructions: A) Assuming that ZOWIE follows ASPE, prepare the journal entries that should be recorded in 2020 relative to the sales and the premium plan assuming that ZOWIE follow the expense approach to account for this promotional program.

B) Assuming that ZOWIE follows IFRS, prepare the journal entries that should be recorded in 2020 relative to the sales and premium plan assuming that ZOWIE follows the revenue approach to account for this promotional program. ZOWIE estimates that $0.80 of the $6 sale price relates to the hand puppet to be awarded.

Answer 1

____expense (Value) Approach_____

1.Revenue of purchases of eggs (450000x$6)=$2700000

2.Complete investments during present Year ($72000x50%)=36000

3. Net of Payments(a-b) =$2664000

journal entries in the records of XYZ

a.Dt-Promotional Expense-$34000

ct - Bank -$34000

(Implying promotional Price exp Acquired)

b. dt-Bank-$2664000

ct-Sales-$2664000

(Signifying selling of eggs)

Revenue Approach

1.Revenue of marketing of eggs=$2700000

2.Expenditure =$72000

c.Revenue of marketing(a-b)=$2628000

journal entries in the records of XYZ

a.Dt-Promotional Expense-$72000

ct - Bank -$72000

(Signifying promotional Value exp Acquired)

b. dt-Bank-$2628000

ct-Sales-$2628000

(Implying selling of eggs)

(ct is credit and dt is debit )

answered by: anonymous