Cheyenne offers an MP3 download (seven-single medley) as a premium for every 6 candy bar wrappers presented by customers together with $2.60. 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 $2.35. 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 2021MP3 codes purchased 270,000 356,400Candy bars sold 2,993,500 2,832,900Wrappers redeemed 1,296,000 1,620,0002020 wrappers expected to be redeemed in 2021 313,200 2021 wrappers expected to be redeemed in 2022 378,000 (a) Prepare the journal entries that should be made in 2020 and 2021 to record the transactions related to the premium plan of the Cheyenne. (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 ExplanationDebitCredit2020 (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.) (b) Indicate the amounts for each account, 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 ClassificationInventory of Premiums $ $ Selling ExpenseCurrent LiabilityLong-term InvestmentsProperty, Plant and EquipmentStockholders' EquityCurrent AssetPremium Liability Selling ExpenseStockholders' EquityCurrent AssetLong-term InvestmentsCurrent LiabilityProperty, Plant and EquipmentPremium Expense Stockholders' EquityCurrent AssetSelling ExpenseProperty, Plant and EquipmentCurrent LiabilityLong-term Investments

a) Journal entry is the first transaction entry in the accounting cycle. It contains a debit balance…

Answered: Cheyenne offers an MP3 download…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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(a)

Prepare the journal entries that should be made in 2020 and 2021 to record the transactions related to the premium plan of the Cheyenne. (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.)

(b)

Indicate the amounts for each account, 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	$	$	Selling ExpenseCurrent LiabilityLong-term InvestmentsProperty, Plant and EquipmentStockholders' EquityCurrent Asset
Premium Liability			Selling ExpenseStockholders' EquityCurrent AssetLong-term InvestmentsCurrent LiabilityProperty, Plant and Equipment
Premium Expense			Stockholders' EquityCurrent AssetSelling ExpenseProperty, Plant and EquipmentCurrent LiabilityLong-term Investments

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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