Question

To stimulate the sales of its Sugar Kids breakfast cereal, Kwiecien Corporation places one coupon in each cereal box. Five coupons are redeemable for a premium consisting of a child's hand puppet. In 2011, the company purchases 40,000 puppets at $1.50 each and sells 480,000 boxes of Sugar Kids at $3.75 a box. From its experience with other similar premium offers, the company estimates that 40% of the coupons issued will be mailed back for redemption. During 2011, 115,000 coupons are presented for redemption.
Instructions
(a) Prepare the journal entries that should be recorded in 2011 relative to the premium plan, assuming that the company follows a policy of charging the cost of coupons to expense as they are redeemed and adjusting the liability account at year end.
(b) Prepare the journal entries that should be recorded in 2011 relative to the premium plan, assuming that the company follows a policy of charging the full estimated cost of the premium plan to expense when the sales are recognized.
(c) How would the accounts resulting from the entries in (a) and (b) above be presented on the 2011 financial statements?


$1.99
Sales0
Views72
Comments0
  • CreatedAugust 23, 2015
  • Files Included
Post your question
5000