Question

Ayayai 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, Ayayai Company purchased 8,600 premiums at 80 cents each and sold 106,000 boxes of soap powder at $3.20 per box; 43,300 coupons were presented for redemption in 2020. It is estimated that 60% of the coupons will eventually be presented for redemption.
Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2020.

Answer 1

Answer:

                                                       DR.            CR.

Inventory Premium                   $6,880

Cash                                                              $ 6,880

Cash                                          $ 339,200

Sales                                                              $ 339,200

Premium Expense                    $3,464

Inventory Premium                                       $3,464

Premium Expense                    $1,624

Premium Liability                                          $1,624

Explanation:

Inventory Premium = 8,600 x $0.80 = $6,880

Sales = 106,000 unit x $3.20 = $339,200

Premium Expense = (43,300/10) x $0.8 = $3,464

Premium Liability = (((106,000 x 60%) - 43,300) / 10) x $0.8 = $1,624