In each box of cereal that it produces, Crackle Cereal Corp. includes a special coupon. The purchaser may redeem 10 coupons for a cheese grater (premium). Each grater costs Crackle $1.00. During 20x5, Crackle purchased 6,000 graters and sold 200,000 boxes of cereal @ $4.00 per box. Based on past experience, Crackle estimates that 50% of the coupons will be redeemed. During 20x5, 45,000 coupons were presented for redemption. During 20x6, 8,000 graters were purchased. As well, Crackle sold 300,000 boxes of cereal at $4.75 per box, and 90,000 coupons were presented for redemption.

Required:

a) Prepare all the journal entries that would be made regarding the cereal sales and the premium plan in 20x5. 

b) Calculate the balance in the estimated premium liability account for December 31, 20x6.

Answer rating: 100% (QA)

Working Notes In Year 2017 45000 Coupons Were Presented for redemption a... View the full answer