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Premium Expense Estimated Liability for Premiums (To record premium expense)

Premium Expense Estimated Liability for Premiums (To record premium expense)

FINANCIAL ACCOUNTING
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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Novak Corp. offers a set of building blocks to customers who send in 3 codes from Novak cereal, along with $1.00. Novak purchased 99,100 building block sets in 2020 for $2.50 each, and paid for them by cash. During 2020, Novak sold 991,000 boxes of cereal for $4 per box. Novak estimates that 10% of the sales amount received from customers relates to the building block sets to be awarded. Novak expects 30% of the codes to be sent in, and in 2020, 237,840 codes were redeemed.
Transcribed Image Text:Novak Corp. offers a set of building blocks to customers who send in 3 codes from Novak cereal, along with $1.00. Novak purchased 99,100 building block sets in 2020 for $2.50 each, and paid for them by cash. During 2020, Novak sold 991,000 boxes of cereal for $4 per box. Novak estimates that 10% of the sales amount received from customers relates to the building block sets to be awarded. Novak expects 30% of the codes to be sent in, and in 2020, 237,840 codes were redeemed.
Prepare all necessary journal entries for 2020 if Novak follows ASPE and prefers to use the expense approach. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Inventory of Premiums 247750 Cash 247750 (To record cash purchase of premiums) Cash 3964000 Sales Revenue 3964000 (To record cash sales) Cash 79280 Premium Expense 118920 Inventory of Premiums 198200 (To record redemption of codes) Premium Expense Estimated Liability for Premiums (To record premium expense)
Transcribed Image Text:Prepare all necessary journal entries for 2020 if Novak follows ASPE and prefers to use the expense approach. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Inventory of Premiums 247750 Cash 247750 (To record cash purchase of premiums) Cash 3964000 Sales Revenue 3964000 (To record cash sales) Cash 79280 Premium Expense 118920 Inventory of Premiums 198200 (To record redemption of codes) Premium Expense Estimated Liability for Premiums (To record premium expense)
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