Question
Yummy Cereal Company is offering one toy shovel set for 15 box tops of its cereal. Year-to-date sales have been off, and it is hoped
Yummy Cereal Company is offering one toy shovel set for 15 box tops of its cereal. Year-to-date sales have been off, and it is hoped that this offer will stimulate demand. Each shovel set costs the company $3. The following data are available for the last 3 months of 2019:
Month | Box of Cereal Sold | Shovel Sets Purchased by Company | Boxes Top Redeemed by Customers |
October | 21,000 | 890 | 12,000 |
November | 27,000 | 1,083 | 16,050 |
December | 33,000 | 1,695 | 20,745 |
It is estimated that only 70% of the box tops will be redeemed. The cereal sells for $2.80 per box. (Note: All sales are cash sales.)
Required: | |
1. | Prepare journal entries for each month to record sales, shovel set purchases, and redemptions. |
2. | Assuming Yummy prepares monthly financial statements, indicate how the inventory of premiums and the estimated liability would be disclosed on Yummys ending balance sheets for October, November, and December. |
PAGE 10 PAGE 11 PAGE 12 GENERAL JOURNAL Score: 305/313 DATE POST. REF. DEBIT CREDIT ACCOUNT TITLE Inventory of Premiums 1 Nov. 30 3,249.00 2 Cash 3,249.00 3 Nov. 30 Cash 75,600.00 4 Sales 75,600.00 5 Nov. 30 Premium Expense 3,013.00 6 6 Estimated Premium Liability 3,013.00 7 Nov. 30 Estimated Premium Liability 767.00 8 Inventory of Premiums 767.00 YUMMY CEREAL COMPANY Score: 4/36 Partial Balance Sheets October, November and December, 2019 1 October November December 2 Current Assets: 3 $240.00 $288.00 $1,230.00 4 Current Liabilities: 5 $540.00 $699.00 $1,170.00
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