P13-9 (Premium Entries and Financial Statement Presentation) Sycamore Candy Company offers an

MP3 download (seven-single medley) as a premium for every five candy bar wrappers presented by

customers together with $2.50. 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 $2.25. In addition, it costs 50 cents to distribute

each code.

2014 2015

MP3 codes purchased 250,000 330,000

Candy bars sold 2,895,400 2,743,600

Wrappers redeemed 1,200,000 1,500,000

2014 wrappers expected to be redeemed in 2015 290,000

2015 wrappers expected to be redeemed in 2016 350,000

Instructions

(a) Prepare the journal entries that should be made in 2014 and 2015 to record the transactions related

to the premium plan of the Sycamore Candy Company.

(b) Indicate the account names, amounts, 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 2014 and 2015.