Moon Company includes 1 coupon in cach box of soap powder that it packs, 10 coupons being redeemable for a premium consisting of a kitchen utensil. In 2014, Moon Company purchased 36,000 premiums at $1.00 each and sold 540,000 boxes of soap powder @ $4.00 per box. Based on past experience, it is estimated that 60% of the coupons will be redeemed. During 2014, 144,000 coupons were presented for redemption. During 2015, 29,000 premiums were purchased at $1.10. The company sold 1,200,000 boxes of soap at $4.00 and 495,000 coupons were presented for redemption. Instructions Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in both 2014 and 2015. Assume a FIFO inventory flow.
Moon Company includes 1 coupon in cach box of soap powder that it packs, 10 coupons being redeemable for a premium consisting of a kitchen utensil. In 2014, Moon Company purchased 36,000 premiums at $1.00 each and sold 540,000 boxes of soap powder @ $4.00 per box. Based on past experience, it is estimated that 60% of the coupons will be redeemed. During 2014, 144,000 coupons were presented for redemption. During 2015, 29,000 premiums were purchased at $1.10. The company sold 1,200,000 boxes of soap at $4.00 and 495,000 coupons were presented for redemption. Instructions Prepare all the entries that would be made relative to sales of soap powder and to the premium plan in both 2014 and 2015. Assume a FIFO inventory flow.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Moon Company includes 1 coupon in each box of soap powder that it packs, 10 coupons being
redeemable for a premium consisting of a kitchen utensil. In 2014, Moon Company purchased
36,000 premiums at $1.00 each and sold 540,000 boxes of soap powder @ $4.00 per box. Based
on past experience, it is estimated that 60% of the coupons will be redeemed. During 2014,
144,000 coupons were presented for redemption.
During 2015, 29,000 premiums were purchased at $1.10. The company sold 1,200,000 boxes of
soap at $4.00 and 495,000 coupons were presented for redemption.
Instructions
Prepare all the entries that would be made relative to sales of soap powder and to the premium
plan in both 2014 and 2015. Assume a FIFO inventory flow.
Expert Solution
Step 1 Working
Year 2014
No. of boxes sold= 540000
Therefore no. of coupons distributed= 540000
Expected to be redeemed= 540000 *60% = 324000
Actually redeemed = 144000
ie: 14400 premiums being redeemed.
Premium purchased= 36000 @ $1.00
Left in stock = 36000 - 14400 = 21600 premiums for redemption.
Year 2015
Opening balance of premiums= 21600
Premiums purchased during the year= 29000 @ $1.10
No. of coupons presented for redemption= 495000
ie: 49500 premiums were redeemed.
21600 premiums @ $1 = $21600
27900 premiums @ $1.10 = $30690
Total Premiums = $52290
Left in stock = 1100 premiums * $1.10 = $1210
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