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Pharoah Corporation sold Sugar Frosted Cocoa Bombs, a children's breakfast cereal. As a promotion, Pharoah offered its customers a free music CD in exchange
Pharoah Corporation sold Sugar Frosted Cocoa Bombs, a children's breakfast cereal. As a promotion, Pharoah offered its customers a free music CD in exchange for 4 boxtops, plus $3.20 to cover postage and handling. The CD cost Pharoah $3.45, and postage costs to mail the CDs out to customers were $2.50. Pharoah estimated that 75% of its customers would redeem boxtops. Pharoah purchased 11,400 CDs at the start of the promotion in November, 2020. 168,000 boxes of cereal were sold during November and December, 2020, and Pharoah's year-end was December 31. Prior to the end of the fiscal year, 6,000 customers took advantage of the offer, which continued until February, 2021. Pharoah follows ASPE and uses the expense approach to account for its premiums. Prepare the journal entry to record the purchase of the promotional CDs. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Inventory of Premiums Debit 39330 Credit Cash 39330 Prepare the journal entry to record the redemption by 6,000 customers. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Cash Premium Expense Inventory of Premiums Debit 19200 1500 Credit 20700 Prepare the journal entry to record the year-end accrual entry for estimated premium expense. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Premium Expense Estimated Liability for Premiums Debit Credit
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