Kane Candy Company offers a coffee mug as a premium for every ten $1 candy bar wrappers presented by customers together with $2. The purchase price of each mug to the company is $1.80; in addition it costs $1.20to mail each mug. The results of the premium plan for the years 2017 and 2018 are as follows (assume all purchases and sales are for cash):

2017 2018

Coffee mugs purchased 750000 820000

Candy bars sold 5600000 6760000

Wrappers redeemed 2700000 4250000

2017 wrappers expected to 1900000

be redeemed in 2018

2018 wrappers expected to 2680000

be redeemed in 2019

Prepare the general journal entries that should be made in 2017 and 2018 related to the above plan by Kane Candy.

date account titles and explanation debit credit

2017 inventory of premiums 1350000

cash 1350000

(To record purchase of coffee mugs)

2017 cash 5600000

sales revenue 5600000

(To record sale of candy bars)

2017 cash 216000

premium expense 270000

inventory of premiums 486000

(To record coffee mugs offered for wrappers redeemed)

2017 premium expense 190000

premium liability 190000

(To record liability against expected redemption of wrappers in 2018)

2018 inventory of premiums 1476000

cash 1476000

(To record purchase of coffee mugs)

2018 cash 6760000

sales revenue 6760000

(To record sale of candy bars)

2018 cash 340000

premium liability 190000

premium expense 235000

inventory of premiums 765000

(To record coffee mugs offered for wrappers redeemed)

2018 premium expense 268000

premium liability 268000

(To record liability against expected redemption of wrappers in 2019)

Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the Kane Candy Company balance sheet and income statement at the end of 2017 and 2018.

Balance Sheet

account name class 2017 2018

inventory of premiums current asset 864000 ?

premium liability current liability 190000 268000

Income Statement

account name class 2017 2018

premium expense operating expense 460,000 503,000

Can you please show me how to calculate the inventory of premiums on the Balance sheet for 2018? Also can you please tell me if my calculations for both the Balance Sheet and Income Statement are correct. I need this as soon as possible. Thank you