Acc423-Sycamore Candy Company offers a CD single as a premium for every five candy bar wrappers…

P13-9 Premium Entries and Financial Statement Presentation

Sycamore Candy Company offers a CD single as a premium for every five candy bar wrappers presented by customers together with $3.20. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each CD to the company is $2.95; 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

2012

2013

CDs purchased

392,500

518,100

Candy bars sold

2,940,100

2,817,700

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

Instructions

(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. (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.)

(b) Indicate the account names, amounts, 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.

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