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Sarasota offers an MP3 download (seven-single medley) as a premium for every 5 candy bar wrappers presented by customers together with $3.30. The candy bars

Sarasota offers an MP3 download (seven-single medley) as a premium for every 5 candy bar wrappers presented by customers together with $3.30. 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 $3.05. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2020 and 2021 are as follows. (All purchases and sales are for cash.)



2020


2021

MP3 codes purchased
340,000
448,800
Candy bars sold
2,665,300
2,676,600
Wrappers redeemed
1,632,000
2,040,000
2020 wrappers expected to be redeemed in 2021
394,400

2021 wrappers expected to be redeemed in 2022


476,000

Part 1

Prepare the journal entries that should be made in 2020 and 2021 to record the transactions related to the premium plan of the Sarasota. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 1,525.)

Account Titles and Explanation

Debit

Credit

2020







(To record the premium inventory.)









(To record the sales.)












(To record the expense associated with the sale.)









(To record the premium liability.)



2021







(To record the premium inventory.)









(To record the sales.)















(To record the expense associated with the sale.)









(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 2020 and 2021.



Amount



Account


2020


2021


Classification

Inventory of Premiums
$
$
                                                                      Long-term Investments Selling Expense Current Liability Current Asset Property, Plant and Equipment Stockholders' Equity
Premium Liability




                                                                      Long-term Investments Current Asset Property, Plant and Equipment Selling Expense Current Liability Stockholders' Equity
Premium Expense

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