Whispering Company offers an MP3 download (seven-single medley) as a premium for every 5 candy bar...

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Whispering Company offers an MP3 download (seven-single medley)as a premium for every 5 candy bar wrappers presented by customerstogether with $3.10. The candy bars are sold by the company todistributors for 30 cents each. The purchase price of each downloadcode to the company is $2.85. In addition, it costs 50 cents todistribute each code. The results of the premium plan for the years2017 and 2018 are as follows. (cash purchases)
2017                  2018
MP3 codespurchased.                                                  320,000            422,400
Candy barssold.                                                         2,664,700.        2,554,300
Wrappersredeemed.                                                   1,536,000.       1,920,000
2017 wrappers expected to be redeemed in2018           371,200
2018 wrappers expected to be redeemed in2019                                 448,000
Indicate the amount for each account, and classifications of theitems related to the premium plan that would appear on the balancesheet and the income statement at the end of 2017 and 2018.
Inventory ofpremiums:      2017?                     2018?

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4.5 Ratings (945 Votes)

Account	2017	2017	Classification
Inventory of Premium	$ 97,920.00	186,240.00	Current Asset
Premium Liability	$ 18,560.00	22,400	Current Liability
Premium Expense	$ 248,960.00	310,400.00	Operating Expense

Calculation of Premium
			2017		2018
	Wrappers Redemmed	1536000/5	$ 307,200.00	1920000/5	$ 384,000.00
	Postage [email protected]		$ 875,520.00	[email protected]	$ 1,094,400.00
	TOTAL(A)		$ 1,182,720.00		$ 1,478,400.00
	Total Cash [email protected] (B)		$ 952,320.00		$ 1,190,400.00
	Premium Expenses(A)-(B)		$ 230,400.00		$ 288,000.00

Journal Entries
2017	Inventory Premium	912,000.00
	Cash		912,000.00
	(320000*2.85)

2017	Cash	8,260,570.00
	Sales Revenue		8,260,570.00
	(2664700*3.1)

2017	Cash (1536000-952320)	583,680.00
	Premium Expenses	230,400.00
	Inventory Premium		814,080.00


2017	Premium Expenses	18560
	premium Liability		18560
	(371200/5)*(2.85+0.50-3.10)

Journal Entries
2018	Inventory Premium	1,203,840.00
	Cash		1,203,840.00
	(422400*3.5)

2018	Cash	7,918,330.00
	Sales Revenue		7,918,330.00
	2554300*3.1

2018	Cash (1920000-1190400)	729,600.00
	Premium Expenses	288,000.00
	Inventory Premium		1,017,600.00


2018	Premium Expenses	22,400
	premium Liability		22,400
	(448000/5)*(2.85+0.50-3.10)

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Whispering Company offers an MP3 download (seven-single medley)as a premium for every 5 candy bar wrappers presented by customerstogether with $3.10. The candy bars are sold by the company todistributors for 30 cents each. The purchase price of each downloadcode to the company is $2.85. In addition, it costs 50 cents todistribute each code. The results of the premium plan for the years2017 and 2018 are as follows. (cash purchases)2017 2018MP3 codespurchased. 320,000 422,400Candy barssold. 2,664,700. 2,554,300Wrappersredeemed. 1,536,000. 1,920,0002017 wrappers expected to be redeemed in2018 371,2002018 wrappers expected to be redeemed in2019 448,000Indicate the amount for each account, and classifications of theitems related to the premium plan that would appear on the balancesheet and the income statement at the end of 2017 and 2018.Inventory ofpremiums: 2017? 2018?