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Chapter 13: Q12E (page 695)

(Premium Entries) No Doubt Company includes 1 coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2017, No Doubt Company purchased 8,800 premiums at 80 cents each and sold 110,000 boxes of soap powder at $3.30 per box; 44,000 coupons were presented for redemption in 2017. It is estimated that 60% of the coupons will eventually be presented for redemption.

Instructions

Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in 2017.

Short Answer

Expert verified

Both sides of the journal totals$375,320.

Step by step solution

01

Definition of Redemption of Bonds

Redemption of the bonds can be defined as the process under which the bond issuing entity repays the amount to its bondholder. Such redemption generates capital gains and losses for the investors.

02

Journal entries

Date

Accounts and Explanation

Debit $

Credit $

1

Inventory of premium

$7,040

Cash

$7,040

2

Cash

$363,000

Sales revenue

$363,000

3

Premium expenses

$3,520

Inventory of premium

$3,520

4

Premium expenses

$1,760

Premium liability

$1,760

$375,320

$375,320

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Most popular questions from this chapter

Question: The following information relates to Moran Co. for the year ended December 31, 2017: net income \(1,245.7 million; unrealized holding loss of \)10.9 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $57.2 million on December 31, 2016. Assuming no other changes in accumulated other comprehensive income, determine (a) other comprehensive income for 2017, (b)comprehensive income for 2017, and (c) accumulated other comprehensive income at December 31, 2017.

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