Sycamore Candy offers an MP3 download (seven-single medley) as a premium for every five candy bar wrappers presented by customers together with £2.50. The candy bars are sold by the company to distributors for £0.30 each. The purchase price of each download code to the company is £2.25. In addition, it costs £0.50 to distribute each code. The results of the premium plan for the years 2022 and 2023 are as follows. All purchases and sales are for cash.

 

Instructions

a. Prepare the journal entries that should be made in 2022 and 2023 to record the transactions related to the premium plan of Sycamore Candy.

b. Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the statement of financial position and the income statement at the end of 2022 and 2023.

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2022 2023 MP3 codes purchased 250,000 330,000 Candy bars sold |2,895,400 2,743,600 Wrappers redeemed 1,200,000 1,500,000 2022 wrappers expected to be redeemed in 2023 290,000 2023 wrappers expected to be redeemed in 2024 350,000