Assume that Wallywill, Inc. offered its customers, which are primarily retail st

Question

Assume that Wallywill, Inc. offered its customers, which are primarily retail stores who sell its products, an advertising allowance equal to 8 percent of the amount of purchases from Wallywill during December, if the retail store would spend the money for advertising in January. Wallywill Inc.'s sales in December totaled $5,000,000, and it was expected that 70% of those sales were made to retailers who would take advantage of the advertising allowance offer. Write the journal entry to show the effect of the accrual (if any) that should be made as of December 31 with respect to the advertising allowance offer.

Explanation / Answer

Journal entry for sales made to retailers and Accrued Advertising allowance given at 8% there on Cash Account Dr $32,20,000 Advertisement Allowance (Asset Accrued) Dr $2,80,000 To Sales A/c $35,00,000 Working ----------- Sales to retailers = $50,00,000 x 70% = $35,00,000 Advertising allowance there on = $3500000 x 8% = $2,80,000

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