Intermediate Accounting: Premium Entries and Financial Statement Presentation Custom Essay

    Acc422 Intermediate Accounting: Premium Entries and Financial Statement Presentation
    Week 5 Assignment
    P13-9 (Premium Entries and Financial Statement Presentation)
    Sycamore Candy Company offers a CD single 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 30 cents each. The purchase price of each CD to the company is $2.25; in addition it costs 50 cents to mail each CD. The results of the premium plan for the years 2010 and 2011 are as follows. (All purchases and sales are for cash.)
    2010 2011
    CDs purchased 250,000 330,000
    Candy bars sold 2,895,400 2,743,600
    Wrappers redeemed 1,200,000 1,500,000
    2010 wrappers expected to be redeemed in 2011 290,000
    2011 wrappers expected to be redeemed in 2012 350,000

    Instructions
    (a) Prepare the journal entries that should be made in 2010 and 2011 to record the transactions related to the premium plan of the Sycamore Candy Company.
    (b) Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the balance sheet and the income statement at the end of 2010 and 2011.

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