Question

Pharoah offers an MP3 download (seven-single medley) as a premium for every 6 candy bar wrappers presented by customers together with $2.65. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each download code to the company is $2.40. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2020 and 2021 are as follows. All purchases and sales are for cash.) MP3 codes purchased Candy bars sold Wrappers redeemed 2020 wrappers expected to be redeemed in 2021 2021 wrappers expected to be redeemed in 2022 2020 375,000 2,659,900 1,800,000 435,000 2021 495,000 2,812,000 2,250,000 525,000 Part 1 Prepare the journal entries that should be made in 2020 and 2021 to record the transactions related to the premium plan of the Pharoah. (If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to decimal places, e.g. 1,525.) Account Titles and Explanation Debit Credit 2020 (To record the premium inventory.) (To record the sales.) (To record the expense associated with the sale.) (To record the premium liability.)

Answer 1

Particulars (YEAR 2020)	Debit	Credit	Working
Inventory Premium	900000
To Cash		900000	375000*2.40
CASH	797970
TO SALES		797970	2659900*0.30
CASH	630000		1800000/6*(2.40-0.30)
PREMIUM EXPENSE	90000
TO INVENTORY PREMIUM		720000	1800000/6*2.40
PREMIUM EXPENSE	18125
TO PREMIUM LIABILITY		18125	435000/6*(2.40+0.50-2.65)
YEAR (2021)
INVENTORY	1188000
TO CASH		1188000	495000*2.40
CASH	843600
TO SALES		843600	2812000*0.30
CASH	806250		2250000/6*(2.65-0.50)
PREMIUM LIABILITY	18125
PREMIUM EXPENSE	75625
TO INVENTORY PREMIUM		900000	2250000/6*2.40

ACCOUNT	2020	2021	CLASSIFICATION
INVENTORY	180000	288000
PREMIUM LIABILITY	18125	18125
PREMIUM EXPENSE	108125	75625