Problem 13-9 - *****ONLY NEED ANSWERS FOR QUESTION MARKS - ALL ANSWERS LISTED ARE CORRECT*****

Sandhill Company offers an MP3 download (seven-single medley) as a premium for every 6 candy bar wrappers presented by customers together with $2.80. 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 $2.55. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2017 and 2018 are as follows. (All purchases and sales are for cash.)

	2017	2018
MP3 Codes Purchased	300,000	396,000
Candy Bars Sold	2,924,600	2,542,100
Wrappers Redeemed	1,440,000	1,800,000
2017 Wrappers Expected to be Redeemed in 2018	348,000
2018 Wrappers Expected to be Redeemed in 2019		420,000

Part 1: Prepare the journal entries that should be made in 2017 and 2018 to record the transactions related to the premium plan of the Sandhill Company.

Account Titles	Debit	Credit
	2017
Inventory of Premiums	765,000	765,000
Cash		765,000
(To record the premium inventory)
Cash	877,380
Sales Revenue		877,380
(To record the sales)
Cash	552,000
Premium Expense	60,000
Inventory of Premiums		612,000
(To Record the expense associated with the sale)
Premium Expense	14,500
Premium Liability		14,500
(To record the premium liability)

	2018
Inventory of Premiums	1,009,800
Cash		1,009,800
(To record the premium inventory)
Cash	762,630
Sales Revenue		762,630
(To record the sales)
Cash	690,000
Premium Liability	14,500
Premium Expense	????????
Inventory of Premiums		????????
(To record the expense associated with the sale)
Premium Expense	17,500
Premium Liability		17,500
(To record the premium liability)

Part 2: 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 2017 and 2018.

Account	2017	2018	Classification
Inventory of Premiums	153,000	????	Current Asset
Premium Liability	14,500	17,500	Current Liability
Premium Expense	74,500	????	Selling Expense