Kane Candy Company sells candy bars for $1 each. Inaddition, Kane offers its customers a coffee mug in exchange for $2 and 10candy wrappers. A coffee mug costs Kane $2.40, and the companyestimates that customers will redeem 60 percent of the candy wrappers.During 2020, Kane purchased 720,000 mugs, sold 5,600,000 candy bars,and redeemed 2,800,000 candy wrappers.Instructions:1. Prepare the journal entry to record the purchase of the coffee mugs.2. Prepare the entry to record the sale of the candy bars.3. Prepare the entry to record the redemption of candy wrappers, thereceipt of $2 per 10 wrappers, and the delivery of the coffee mugs.4. Prepare the adjusting entry to record additional premium expense andthe estimated premium liability at Dec. 31, 2020.

Answered: Kane Candy Company sells candy bars for…

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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Kane Candy Company sells candy bars for $1 each. In
addition, Kane offers its customers a coffee mug in exchange for $2 and 10
candy wrappers. A coffee mug costs Kane $2.40, and the company
estimates that customers will redeem 60 percent of the candy wrappers.
During 2020, Kane purchased 720,000 mugs, sold 5,600,000 candy bars,
and redeemed 2,800,000 candy wrappers.
Instructions:
1. Prepare the journal entry to record the purchase of the coffee mugs.
2. Prepare the entry to record the sale of the candy bars.
3. Prepare the entry to record the redemption of candy wrappers, the
receipt of $2 per 10 wrappers, and the delivery of the coffee mugs.
4. Prepare the adjusting entry to record additional premium expense and
the estimated premium liability at Dec. 31, 2020.

Expert Solution

Step 1

In any organization's accounting system, a journal entry documents a commercial transaction. The foundation of the double-entry accounting technique, which has been around for centuries, is made up of journal entries. They enable tracking of the purposes for which a company has spent its resources and the sources of those resources. According to the double-entry accounting technique, every transaction must be documented in at least two accounts. For instance, a cash purchase of goods by a company will be recorded in both the supply account and the cash account. Let's start with the fundamentals before we go too far.

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