On the back of its cereal boxes, Tiger Cereal Company offers a premium to its customers. The

Question:

On the back of its cereal boxes, Tiger Cereal Company offers a premium to its customers. The premium, a toy truck, may be claimed by sending in $1 plus 10 coupons; one coupon is included in each box of cereal sold. Tiger estimates, based on past experience, that 60% of the coupons will be redeemed. During 2019, Tiger purchased 240,000 toy trucks at $1.25 each for the premium promotion and sold 5,000,000 boxes of cereal at $1.80 per box. In 2019, 2,200,000 coupons were redeemed.

Required:
1. Prepare the journal entries related to the previous promotion (including sales) for 2019.
2. Show how the items related to the premium plan would be reported on the December 31, 2019, balance sheet.
3. Next Level What would be the effect on the financial statements if Tiger recorded premium expense as the coupons were redeemed?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...

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