Walmax, Inc., is one of the leading chain of grocery in the country. On January 1, 2020, the company began to offer its customers a free cookie sheet in exchange for 100 coupons. Customers earned 1 coupon for each 20$ of groceries purchased at any Walmax store during the campaign period.

The coupons could be redeemed within 2 years of the date of issue.

In preparation for this campaign, the company purchased a premium inventory, during December 2019 of 11,000 cookie sheets at 8$ each. The sales eligible for receiving coupons amounted to $6.4 million in 2020. The company estimates that 38% of the coupons issued will be redeemed in 2020 and 22% in 2021.

Similarly, in 2021, consumers redeemed 45,000 coupons issued in 2020, and in 2022, they redeemed 6,200 coupons issued in 2020.

Walmax follows ASPE. Assume that the company charges the full estimated cost of the premium plan when the sales are recognized.

a) Prepare the journal entry required to record the acquisition of the cookie sheets in December 2019.

b) prepare the journal entry required to record the liability accrued for the promotion campaign.

c) Determine the amount of promotion liability reported on the Balance sheet as at December 31,2020 and how will it be classified?

e) In 2022, any coupons issued in 2020 and not redeemed lapsed. Prepare the journal entry required to record this transaction.

Answer rating: 100% (QA)

Question Answer to a Dec 2019 Cookie Sheets ac Dr 88000 To Vendor ac 88000 Being Cookie Sheets purch... View the full answer