Question 1)

Sycamore Candy Company offers a CD single as a premium for every 5 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 CD to the company is $2.25; in addition, it costs 50 cents to mail each CD. The results of the premium plan for the years 2012 and 2013 are as follows. (All purchases and sales are for cash.)

		2012		2013
CDs purchased		392,500		518,100
Candy bars sold		2,994,800		2,826,100
Wrappers redeemed		1,884,000		2,355,000
2012 wrappers expected to be redeemed in 2013		455,300
2013 wrappers expected to be redeemed in 2014				549,500

(a) Prepare the journal entries that should be made in 2012 and 2013 to record the transactions related to the premium plan of the Sycamore Candy Company.

(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 2012 and 2013.

Question 2

Presented below are three independent situations. Answer the question at the end of each situation. a. During 2012, Maverick Inc. became involved in a tax dispute with the IRS. Maverick