Cheyenne offers an MP3 download (seven-single medley) as a premium for every 6 candy bar wrappers presented by customers together with $2.60. 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 $2.35. 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.)

2020 2021

MP3 codes purchased 270,000 356,400

Candy bars sold 2,993,500 2,832,900

Wrappers redeemed 1,296,000 1,620,000

2020 wrappers expected to be redeemed in 2021 313,200

2021 wrappers expected to be redeemed in 2022 378,000

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(a)

Prepare the journal entries that should be made in 2020 and 2021 to record the transactions related to the premium plan of the Cheyenne. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 1,525.)

Account Titles and Explanation Debit Credit

2020

Inventory of Premium 634,500

Cash 634,500

(To record the premium inventory.)

Cash 898,050

Sales Revenue 898,050

(To record the sales.)

Cash 453,600

Premium Expense 54,000

Inventory of Premiums 507,600

(To record the expense associated with the sale.)

Premium Expense 13,050

Premium Liability 13,050

(To record the premium liability.)

2021

Inventory of Premiums 837,540

Cash 837,540

(To record the premium inventory.)

Cash 849,870

Sales Revenue 849,870

(To record the sales.)

Cash 567,000

Premium Expense 54,450

Premium Liability 13,050

Inventory of Premiums 634,500

(To record the expense associated with the sale.)

Premium Expense 15,750

Premium Liability 15,750

(To record the premium liability.)

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(b)

Indicate the amounts for each accounts, 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 2020 and 2021.

Amount

Account 2020 2021 Classification

Inventory of Premiums $ $

Premium Liability

Premium Expense