Problem 13-9Cheyenne Company offers an MP3 download (seven-single medley) as a premium for every 5 candy bar wrappers presented by customers together with $3.50. 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 $3.25. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2017 and 2018 are as follows. (All purchases and sales are for cash.)20172018MP3 codes purchased 360,000 475,200Candy bars sold 2,825,000 2,546,500Wrappers redeemed 1,728,000 2,160,0002017 wrappers expected to be redeemed in 2018 417,600 2018 wrappers expected to be redeemed in 2019 504,000Prepare the journal entries that should be made in 2017 and 2018 to record the transactions related to the premium plan of the Cheyenne 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.)Account Titles and ExplanationDebitCredit2017Inventory of Premiums Cash(To record the premium inventory.)Cash Sales Revenue(To record the sales.)Cash Premium Expense Inventory of Premiums(To record the expense associated with the sale.)Premium Expense Premium Liability(To record the premium liability.)2018Inventory of Premiums Cash(To record the premium inventory.)Cash Sales Revenue(To record the sales.)     (To record the expense associated with the sale.)  (To record the premium liability.)SHOW LIST OF ACCOUNTSLINK TO TEXTLINK TO TEXTIndicate the amounts for each accounts, and classifications of the items related to the premium plan that would appear on the balance sheet and the income statement at the end of 2017 and 2018.AmountAccount20172018ClassificationInventory of Premiums $$Premium LiabilityPremium Expense

Question
Asked Apr 28, 2019
436 views

Problem 13-9
Cheyenne Company offers an MP3 download (seven-single medley) as a premium for every 5 candy bar wrappers presented by customers together with $3.50. 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 $3.25. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2017 and 2018 are as follows. (All purchases and sales are for cash.)

2017
2018
MP3 codes purchased 360,000 475,200
Candy bars sold 2,825,000 2,546,500
Wrappers redeemed 1,728,000 2,160,000
2017 wrappers expected to be redeemed in 2018 417,600
2018 wrappers expected to be redeemed in 2019 504,000



Prepare the journal entries that should be made in 2017 and 2018 to record the transactions related to the premium plan of the Cheyenne 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.)

Account Titles and Explanation
Debit
Credit
2017

Inventory of Premiums

 

Cash


(To record the premium inventory.)

Cash

 

Sales Revenue


(To record the sales.)

Cash

 

Premium Expense

 

Inventory of Premiums


(To record the expense associated with the sale.)

Premium Expense

 

Premium Liability


(To record the premium liability.)
2018

Inventory of Premiums

 

Cash


(To record the premium inventory.)

Cash

 

Sales Revenue


(To record the sales.)

 

 

 

 

 


(To record the expense associated with the sale.)

 

 


(To record the premium liability.)

SHOW LIST OF ACCOUNTS
LINK TO TEXT
LINK TO TEXT



Indicate the amounts for each accounts, and classifications of the items related to the premium plan that would appear on the balance sheet and the income statement at the end of 2017 and 2018.

Amount
Account
2017
2018
Classification
Inventory of Premiums $
$

Premium Liability


Premium Expense

 

check_circle

Expert Answer

Step 1

Workings:

Step 2

Step 3

...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Book Keeping

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Which of the following is correct? The gain basis for property received by gift is the lesser of th...

A: The tax basis of inherited or gifted property: Various tax rules are given under Federal tax in orde...

question_answer

Q: Which of the following is not a “tax status” for an asset? Capital loss asset. Capital asset. Secti...

A: Capital Assets:All property that taxpayers own is capital asset, unless it falls into one of the fol...

question_answer

Q: I attempted this problem and tried to do the company's statement of cost of goods manufactured for d...

A: Statement of cost of goods manufactured: It is a statement which reports the detailed cost breakup o...

question_answer

Q: If the offer is accepted with unused capacity, fixed costs will not increase. The amount of the sale...

A: The question can be solved as follows :

question_answer

Q: Flexible Budgets; Total Operating Income Variance; Breakdown of the Total Operating Income Variance;...

A: 1. Total operating income variance for July.

question_answer

Q: Teal Mountain Inc. markets CDs of numerous performing artists. At the beginning of March, Teal Mount...

A: The given question can be calculated as follows :

question_answer

Q: Why is it necessary to prepare formal financial statements if all the data are in the statement colu...

A: Worksheet is an accounting  tool used by the business  which is used for balancing and closing the b...

question_answer

Q: Problem 14-5In each of the following independent cases, the company closes its books on December 31....

A: Amortization of bond: The process of allocation and reduction of the discount or premium on bonds to...

question_answer

Q: I need help solving this, thanks!

A: Break-even sales: Break-even sales is that level of sales at which there is no profit or no loss on ...