Question

7. During the Christmas season, Holiday offers a special to its retail customers. Customers can send in 4 UPC codes from boxes of Christmas lights along with $3.25 and receive one box of Christmas lights at no additional cost. During 2021, Holiday sold 1,890,000 boxes of lights for $14.75 per box; the lights cost Holiday $5.30 per box (the actual sales of the boxes of bulbs are already included in sales revenue, cash, inventory and COGS on the trial balance). Holiday estimates that 15% of the box UPC codes will be redeemed. As of December 31, 2021, 102,500 box tops had been redeemed.

Make Journal Entries

Answer 1

Account Titles	Debit	Credit
Accounts Receivable / Cash	$ 27,877,500
Sales Revenue		$ 27,877,500
(To record sales revenue)
Cost of Goods Sold	$ 10,017,000
Inventory		$ 10,017,000
(To record cost of goods sold)
Cash	$   83,281.25		=102500/4*3.25
Premium Expense	$   52,531.25		=102500/4*(5.3-3.25)
Inventory		$ 135,812.50	=102500/4*5.3
(To record coupons redeemed)
Premium Expense	$   92,762.50		=(1890000*15%-102500)/4*(5.3-3.25)
Premium Liability		$   92,762.50
(To record premium liability)