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.) Account Titles and Explanation Premium Expense Premium Liability Debit 105600 Credit 105600
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.) Account Titles and Explanation Premium Expense Premium Liability Debit 105600 Credit 105600
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Transcribed Image Text: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
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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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