Question 5 2014 2015 (a) Prepare the journal entries that should be made in 2014

Question

Question 5

2014

2015

(a)

Prepare the journal entries that should be made in 2014 and 2015 to record the transactions related to the premium plan of the Sycamore Candy Company. (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.)

(a)

Account Titles and Explanation

Debit

Credit

2014

(To record the pemium inventory.)

(To record the sales.)

(To record the expense associated with the sale.)

(To record the premium liability.)

2015

(To record the pemium inventory.)

(To record the sales.)

(To record the expense associated with the sale.)

(To record the premium liability.)

Question 5

Sycamore Candy Company offers an MP3 download (seven-single medley) as a premium for every 6 candy bar wrappers presented by customers together with $3.10. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each download code to the company is $2.85. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2014 and 2015 are as follows. (All purchases and sales are for cash.)

2014

2015

MP3 codes purchased 272,500 359,700 Candy bars sold 2,907,700 2,836,600 Wrappers redeemed 1,308,000 1,635,000 2014 wrappers expected to be redeemed in 2015 316,100 2015 wrappers expected to be redeemed in 2016 381,500

Explanation / Answer

(a)

Date Account Title and Explanation Debit Credit 2014 MP3 Code       2,72,500      To Cash     2,72,500 (Being MP3 Code Purchased) Candy bars 29,07,700      To Sales 29,07,700 (being candy Bars sold) Premium for wrappers 13,08,000      To Cash 13,08,000 (being expenses associated with the sale recognised) Premium for Wrappers     3,16,100          To Wrappers Redeemable     3,16,100 (being 2014 wrappers expected to be redeemed in 2015 recognised) 2015 MP3 Code       3,59,700      To Cash     3,59,700 (Being MP3 Code Purchased) Candy bars 28,36,600      To Sales 28,36,600 (being candy Bars sold) Premium for wrappers 16,35,000      To Cash 16,35,000 (being expenses associated with the sale recognised) Premium for Wrappers     3,81,500          To Wrappers Redeemable     3,81,500 (being 2014 wrappers expected to be redeemed in 2015 recognised)

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