Balance Sheet of General Products Inc. on Dec 31, 2015 Inventory 317,060 Invento
ID: 2589626 • Letter: B
Question
Balance Sheet of General Products Inc. on Dec 31, 2015
Inventory 317,060
Inventory of Premiums @ $1.10 per premium 660
Liability for Premiums and Coupons 550
Prepare journal entry for the following for 2016
All sales are on credit and totaled $ 940,560.
Cost of goods sold are $780,650.
Included in the total sales of $940,560 are the sales of General Products brand 6000 soap powder boxes
General Products includes 1 coupon in every soap powder box.
Customers can redeem 4 coupons for 1 kitchen utensil.
Based on past 60% of the coupons are redeemed by customers.
During 2016 3,400 coupons were redeemed.
Purchase of premiums during 2016 totaled
1,000 premiums @ $1.10 each on credit.
Please prepare journal entries for 2016
Explanation / Answer
Account Debit Credit Accounts receivable 940560 Sales 940560 [Credit sales accounted] Cost of goods sold 780650 Inventory 780650 [cost of goods sold charged to income statement] Premium expense 990 Note 1 Liability for premiums and coupons 990 [Expected premium expense recorded] Liability for premiums and coupons 935 Note 2 Invenroty of premiums 935 [Premiums redeemed] Invenroty of premiums 1100 Accounts payable 1100 [Purchase of premium inventory= 1000*1.1=1100] Note 1 Premium expense: a Number of coupons 6000 b Coupons required per premium 4 c=a/b Premiums redeemable 1500 d Expected redemptin rate 60% e=c*d Expecred premiums redeemable 900 f Cost of premium 1.1 g=e*f Premium expense 990 Note 2 Premiums redeemed a Number of coupons 3400 b Coupons required per premium 4 c=a/b Premiums redeemed 850 d Cost of premium 1.1 e=c*d Premium Inventory outflow 935
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