Waterway Company offers a set of building blocks to customers who send in 3 UPC codes from Waterway cereal, along with 50¢. Theblock sets cost Waterway $1.00 each to purchase and 60¢ each to mail to customers. During 2025, Waterway sold 960,000 boxes ofcereal. The company expects 30% of the UPC codes to be sent in. During 2025, 96,000 UPC codes were redeemed. PrepareWaterway's December 31, 2025, adjusting entry. (If no entry is required, select "No Entry for the account titles and enter O for the amounts.Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.)CreditAccount Titles and ExplanationPremium ExpensePremium LiabilityDebit105600105600

Answered: Waterway Company offers a set of…

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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Waterway Company offers a set of building blocks to customers who send in 3 UPC codes from Waterway cereal, along with 50¢. The
block sets cost Waterway $1.00 each to purchase and 60¢ each to mail to customers. During 2025, Waterway sold 960,000 boxes of
cereal. The company expects 30% of the UPC codes to be sent in. During 2025, 96,000 UPC codes were redeemed. Prepare
Waterway's December 31, 2025, adjusting entry. (If no entry is required, select "No Entry for the account titles and enter O for the amounts.
Credit account titles are automatically indented when amount is entered. Do not indent manually. List all debit entries before credit entries.)
Credit
Account Titles and Explanation
Premium Expense
Premium Liability
Debit
105600
105600

Expert Solution

Step 1: Introduction of journal entry

Recording transactions in the books of accounts begins with the journal entry. In accordance with the accrual approach of accounting, adjustment entries are entries that are generated at year's end to record the transaction. This provides up-to-date and precise account balance information. In order to appropriately record income and costs, adjusting journal entries must be made. According to the matching principle, adjusting journal entries must be made so that costs are recorded in the same period as the revenue associated with these expenses.

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