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Company includes one coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil)
Company includes one coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2020, No Doubt Company purchased 8,800 premiums at 80 cents each and sold 110,000 boxes of soap powder at $3.30 per box; 44.000 coupons were presented for redemption in 2020. It is estimated that 60% of the coupons will eventually be presented for redemption. Instructions Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2020
Expert Solution
| DATE | ENTRY | DEBIT | CREDIT |
| 1 | Inventory premium | 7040 | |
| (8800*.08) | 7040 | ||
| 2 | cash | 363000 | |
| To sales | 363000 | ||
| (110000*33) | |||
| 3 | Premium expenses | 3520 | |
| To inventory premium | 3520 | ||
| (44000/10)*.08 | |||
| 4 | Premium Expenses | 1760 | |
| To estimated liability premium | 1760 | ||
| (110000*60%)-44000)/10*.80 |
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