Exercise 13-12 No Doubt Company includes 1 coupon in each box of soap powder tha

Question

Exercise 13-12

No Doubt Company includes 1 coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2014, No Doubt Company purchased 8,830 premiums at 70 cents each and sold 123,500 boxes of soap powder at $3.70 per box; 48,400 coupons were presented for redemption in 2014. It is estimated that 60% of the coupons will eventually be presented for redemption.

Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2014. (Round answers to 0 decimal places, e.g. 5,275. 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.)

Account Titles and Explanation

Debit

Credit

(To record the pemium inventory)

(To record the sales)

(To record the expense associated with the sale)

(To record the premium liability)

Account Titles and Explanation

Debit

Credit

(To record the pemium inventory)

(To record the sales)

(To record the expense associated with the sale)

(To record the premium liability)

Explanation / Answer

Solution.

Entries that is made related to sales of soap powder and to the premium plan in 2014

Date Particular Debit Credit Premium Inventory (2014)         6,181.00 Cash (or Accounts Payable)         6,181.00 8,830 x 0.70 = 6,181 Cash    456,950.00 Sales revenue    456,950.00 123,500 x $3.70 = 456,950 Premium Expense         3,388.00 Premium Inventory (2014)         3,388.00 (48400 / 10 )x 0.70 Premium Expense Premium Inventory (2014) 123,500 x .60 = 74,100 Coupons         1,799.00 74,100 Coupons - 48,400 = 25,700 / 10 = 2,570 Premiums         1,799.00

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