Prepare the journal entries in the books of Company TC for 2019.

Question

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 9, Problem 20E

1.

To determine

Prepare the journal entries in the books of Company TC for 2019.

1.

Expert Solution

Explanation of Solution

Prepare the journal entry to record the purchase of the toy trucks:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Inventory of premiums	300,000
	Cash (240,000×$1.25)		300,000
	(To record the purchase of toy trucks)

Table (1)

Prepare the journal entry to record the sales:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash or accounts receivable	9,000,000
	Sales (5,000,000×$1.80)		9,000,000
	(To record the sales)

Table (2)

Prepare the journal entry to record the estimate of total premium liability:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Premium expenses (2)	75,000
	Estimated premium liability		75,000
	(To record the recognition of estimated premium liability)

Table (3)

Working note (1):

Calculate the total box tops estimated for redemption:

Particulars	Amount ($)	Amount ($)
Total box tops outstanding in 2019 (A)	5,000,000
Estimated percent redeemed (B)	60%
Total coupons estimated for redemption (C) (A×B)		$3,000,000

Table (4)

Working note (2):

Calculate the amount of premium expenses:

Premium expense = [Total coupons estimated for redemptionOffer of a toy truck upon return of 10 coupons×(Cost of a toy truck−Collection of cashfrom customers on redemption of 10 coupons)]=3,000,000 coupons10×($1.25−$1.00)=$75,000

Prepare the journal entry to record the redemption of 2,200,000 coupons in 2019:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash (2,200,00010×$1)	220,000
	Estimated premium liability (2,200,00010×$0.25)	55,000
	Inventory of premiums (2,200,00010×$1.25)		275,000
	(To record the redemption of 2,200,000 coupons)

Table (5)

2.

To determine

Identify the manner in which the items related to premium plan would be reported in the balance sheet as of December 31, 2019.

2.

Expert Solution

Explanation of Solution

Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the partial balance sheet as of December 31, 2019.

Company TC
Balance Sheet Statement (Partial)
As at December 31, 2019
Assets	Amount
Current assets:
Inventory of premiums (3)	$25,000

Liabilities	Amount
Current liabilities:
Estimated premium liability (4)	$20,000

Table (6)

Working note (3):

Determine the amount of inventory premium as at December 31, 2019.

Inventory of premiumat December 31, 2019}= [Increase (debit) in inventory of premium in 2019 −Decrease (credit) in inventory of premium in 2019 −]=$300,000−$275,000=$25,000

Working note (4):

Determine the amount of estimated premium liability as at December 31, 2019.

Estimated premium liabilityat December 31, 2019}= [Increase (credit) in estimatedpremium liability in 2019 −Decrease (debit) in estimatedpremium liability in 2019 −]=$75,000−$55,000=$20,000

3.

To determine

Explain the effects on the financial statements if Company TC recorded the premium expense as the coupons were redeemed.

3.

Expert Solution

Explanation of Solution

Effects on the financial statements:

The premium was offered by Company TC to increase the sales and the redemption of coupons is probable and that can be reasonably estimated. Thus, Company TC must record the estimate as an expense and the related liability during the sales period. If the estimate is not made, then the expenses will not match properly against the sales premium. As an effect of this Company TC’s expense would be understated by $20,000. In addition to this, Company TC’s liability will not properly reflect the probable obligation of the company. Thus, Company TC’s liability will be understated by $20,000.

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Students have asked these similar questions

Problem 3-2B Preparing adjusting and subsequent journal entries P1 P2 P3 P4 Natsu Company's annual accounting period ends on October 31. The following information concerns the adjusting entries that need to be recorded as of that date. Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Building; Accumulated Depreciation- Building; Salaries Payable; Unearned Revenue; Rent Revenue; Salaries Expense; Office Supplies Expense; Insurance Expense; and Depreciation Expense-Building. a. b. c. d. e. f. The Office Supplies account started the fiscal year with a $600 balance. During the fiscal year, the company purchased supplies for $4,570, which was added to the Office Supplies account. The supplies available at October 31 totaled $800. The Prepaid Insurance account had a $12,000 debit balance at October 31 before adjusting for the costs of any expired coverage for the fiscal year. An analysis of prepaid insurance shows…

Problem 3-1B Identifying adjusting entries with explanations P1 P2 P3 P4 For journal entries 1 through 12, indicate the explanation that most closely describes it. You can use explanations more than once. A. To record payment of a prepaid expense. B. To record this period's use of a prepaid expense. C. To record this period's depreciation expense. D. To record receipt of unearned revenue. E. To record this period's earning of prior unearned revenue. F. To record an accrued expense. G. To record payment of an accrued expense. H. To record an accrued revenue. I. To record receipt of accrued revenue. 1. Interest Receivable 3,500 7. Cash 1,500 Interest Revenue 3,500 Accounts Receivable (from services) 1,500 2. Salaries Payable 9,000 8. Salaries Expense 7,000 Cash 9,000 Salaries Payable 7,000 3. Depreciation Expense 8,000 9. Cash 1,000 Accumulated Depreciation. 8,000 Interest Receivable 1,000 4. Cash 9,000 10. Unearned Revenue 9,000 Prepaid Rent Cash 3,000 3,000 5. Insurance Expense 4,000…

None

Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 9, Problem 20E

1.

To determine

Prepare the journal entries in the books of Company TC for 2019.

1.

Expert Solution

Explanation of Solution

Prepare the journal entry to record the purchase of the toy trucks:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Inventory of premiums	300,000
	Cash (240,000×$1.25)		300,000
	(To record the purchase of toy trucks)

Table (1)

Prepare the journal entry to record the sales:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash or accounts receivable	9,000,000
	Sales (5,000,000×$1.80)		9,000,000
	(To record the sales)

Table (2)

Prepare the journal entry to record the estimate of total premium liability:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Premium expenses (2)	75,000
	Estimated premium liability		75,000
	(To record the recognition of estimated premium liability)

Table (3)

Working note (1):

Calculate the total box tops estimated for redemption:

Particulars	Amount ($)	Amount ($)
Total box tops outstanding in 2019 (A)	5,000,000
Estimated percent redeemed (B)	60%
Total coupons estimated for redemption (C) (A×B)		$3,000,000

Table (4)

Working note (2):

Calculate the amount of premium expenses:

Premium expense = [Total coupons estimated for redemptionOffer of a toy truck upon return of 10 coupons×(Cost of a toy truck−Collection of cashfrom customers on redemption of 10 coupons)]=3,000,000 coupons10×($1.25−$1.00)=$75,000

Prepare the journal entry to record the redemption of 2,200,000 coupons in 2019:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash (2,200,00010×$1)	220,000
	Estimated premium liability (2,200,00010×$0.25)	55,000
	Inventory of premiums (2,200,00010×$1.25)		275,000
	(To record the redemption of 2,200,000 coupons)

Table (5)

2.

To determine

Identify the manner in which the items related to premium plan would be reported in the balance sheet as of December 31, 2019.

2.

Expert Solution

Explanation of Solution

Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the partial balance sheet as of December 31, 2019.

Company TC
Balance Sheet Statement (Partial)
As at December 31, 2019
Assets	Amount
Current assets:
Inventory of premiums (3)	$25,000

Liabilities	Amount
Current liabilities:
Estimated premium liability (4)	$20,000

Table (6)

Working note (3):

Determine the amount of inventory premium as at December 31, 2019.

Inventory of premiumat December 31, 2019}= [Increase (debit) in inventory of premium in 2019 −Decrease (credit) in inventory of premium in 2019 −]=$300,000−$275,000=$25,000

Working note (4):

Determine the amount of estimated premium liability as at December 31, 2019.

Estimated premium liabilityat December 31, 2019}= [Increase (credit) in estimatedpremium liability in 2019 −Decrease (debit) in estimatedpremium liability in 2019 −]=$75,000−$55,000=$20,000

3.

To determine

Explain the effects on the financial statements if Company TC recorded the premium expense as the coupons were redeemed.

3.

Expert Solution

Explanation of Solution

Effects on the financial statements:

The premium was offered by Company TC to increase the sales and the redemption of coupons is probable and that can be reasonably estimated. Thus, Company TC must record the estimate as an expense and the related liability during the sales period. If the estimate is not made, then the expenses will not match properly against the sales premium. As an effect of this Company TC’s expense would be understated by $20,000. In addition to this, Company TC’s liability will not properly reflect the probable obligation of the company. Thus, Company TC’s liability will be understated by $20,000.

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 9, Problem 20E

1.

To determine

Prepare the journal entries in the books of Company TC for 2019.

1.

Expert Solution

Explanation of Solution

Prepare the journal entry to record the purchase of the toy trucks:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Inventory of premiums	300,000
	Cash (240,000×$1.25)		300,000
	(To record the purchase of toy trucks)

Table (1)

Prepare the journal entry to record the sales:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash or accounts receivable	9,000,000
	Sales (5,000,000×$1.80)		9,000,000
	(To record the sales)

Table (2)

Prepare the journal entry to record the estimate of total premium liability:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Premium expenses (2)	75,000
	Estimated premium liability		75,000
	(To record the recognition of estimated premium liability)

Table (3)

Working note (1):

Calculate the total box tops estimated for redemption:

Particulars	Amount ($)	Amount ($)
Total box tops outstanding in 2019 (A)	5,000,000
Estimated percent redeemed (B)	60%
Total coupons estimated for redemption (C) (A×B)		$3,000,000

Table (4)

Working note (2):

Calculate the amount of premium expenses:

Premium expense = [Total coupons estimated for redemptionOffer of a toy truck upon return of 10 coupons×(Cost of a toy truck−Collection of cashfrom customers on redemption of 10 coupons)]=3,000,000 coupons10×($1.25−$1.00)=$75,000

Prepare the journal entry to record the redemption of 2,200,000 coupons in 2019:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash (2,200,00010×$1)	220,000
	Estimated premium liability (2,200,00010×$0.25)	55,000
	Inventory of premiums (2,200,00010×$1.25)		275,000
	(To record the redemption of 2,200,000 coupons)

Table (5)

2.

To determine

Identify the manner in which the items related to premium plan would be reported in the balance sheet as of December 31, 2019.

2.

Expert Solution

Explanation of Solution

Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the partial balance sheet as of December 31, 2019.

Company TC
Balance Sheet Statement (Partial)
As at December 31, 2019
Assets	Amount
Current assets:
Inventory of premiums (3)	$25,000

Liabilities	Amount
Current liabilities:
Estimated premium liability (4)	$20,000

Table (6)

Working note (3):

Determine the amount of inventory premium as at December 31, 2019.

Inventory of premiumat December 31, 2019}= [Increase (debit) in inventory of premium in 2019 −Decrease (credit) in inventory of premium in 2019 −]=$300,000−$275,000=$25,000

Working note (4):

Determine the amount of estimated premium liability as at December 31, 2019.

Estimated premium liabilityat December 31, 2019}= [Increase (credit) in estimatedpremium liability in 2019 −Decrease (debit) in estimatedpremium liability in 2019 −]=$75,000−$55,000=$20,000

3.

To determine

Explain the effects on the financial statements if Company TC recorded the premium expense as the coupons were redeemed.

3.

Expert Solution

Explanation of Solution

Effects on the financial statements:

The premium was offered by Company TC to increase the sales and the redemption of coupons is probable and that can be reasonably estimated. Thus, Company TC must record the estimate as an expense and the related liability during the sales period. If the estimate is not made, then the expenses will not match properly against the sales premium. As an effect of this Company TC’s expense would be understated by $20,000. In addition to this, Company TC’s liability will not properly reflect the probable obligation of the company. Thus, Company TC’s liability will be understated by $20,000.

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 9, Problem 20E

1.

To determine

Prepare the journal entries in the books of Company TC for 2019.

1.

Expert Solution

Explanation of Solution

Prepare the journal entry to record the purchase of the toy trucks:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Inventory of premiums	300,000
	Cash (240,000×$1.25)		300,000
	(To record the purchase of toy trucks)

Table (1)

Prepare the journal entry to record the sales:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash or accounts receivable	9,000,000
	Sales (5,000,000×$1.80)		9,000,000
	(To record the sales)

Table (2)

Prepare the journal entry to record the estimate of total premium liability:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Premium expenses (2)	75,000
	Estimated premium liability		75,000
	(To record the recognition of estimated premium liability)

Table (3)

Working note (1):

Calculate the total box tops estimated for redemption:

Particulars	Amount ($)	Amount ($)
Total box tops outstanding in 2019 (A)	5,000,000
Estimated percent redeemed (B)	60%
Total coupons estimated for redemption (C) (A×B)		$3,000,000

Table (4)

Working note (2):

Calculate the amount of premium expenses:

Premium expense = [Total coupons estimated for redemptionOffer of a toy truck upon return of 10 coupons×(Cost of a toy truck−Collection of cashfrom customers on redemption of 10 coupons)]=3,000,000 coupons10×($1.25−$1.00)=$75,000

Prepare the journal entry to record the redemption of 2,200,000 coupons in 2019:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash (2,200,00010×$1)	220,000
	Estimated premium liability (2,200,00010×$0.25)	55,000
	Inventory of premiums (2,200,00010×$1.25)		275,000
	(To record the redemption of 2,200,000 coupons)

Table (5)

2.

To determine

Identify the manner in which the items related to premium plan would be reported in the balance sheet as of December 31, 2019.

2.

Expert Solution

Explanation of Solution

Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the partial balance sheet as of December 31, 2019.

Company TC
Balance Sheet Statement (Partial)
As at December 31, 2019
Assets	Amount
Current assets:
Inventory of premiums (3)	$25,000

Liabilities	Amount
Current liabilities:
Estimated premium liability (4)	$20,000

Table (6)

Working note (3):

Determine the amount of inventory premium as at December 31, 2019.

Inventory of premiumat December 31, 2019}= [Increase (debit) in inventory of premium in 2019 −Decrease (credit) in inventory of premium in 2019 −]=$300,000−$275,000=$25,000

Working note (4):

Determine the amount of estimated premium liability as at December 31, 2019.

Estimated premium liabilityat December 31, 2019}= [Increase (credit) in estimatedpremium liability in 2019 −Decrease (debit) in estimatedpremium liability in 2019 −]=$75,000−$55,000=$20,000

3.

To determine

Explain the effects on the financial statements if Company TC recorded the premium expense as the coupons were redeemed.

3.

Expert Solution

Explanation of Solution

Effects on the financial statements:

The premium was offered by Company TC to increase the sales and the redemption of coupons is probable and that can be reasonably estimated. Thus, Company TC must record the estimate as an expense and the related liability during the sales period. If the estimate is not made, then the expenses will not match properly against the sales premium. As an effect of this Company TC’s expense would be understated by $20,000. In addition to this, Company TC’s liability will not properly reflect the probable obligation of the company. Thus, Company TC’s liability will be understated by $20,000.

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Answer 5

Chapter 9, Problem 20E

1.

To determine

Prepare the journal entries in the books of Company TC for 2019.

1.

Expert Solution

Explanation of Solution

Prepare the journal entry to record the purchase of the toy trucks:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Inventory of premiums	300,000
	Cash (240,000×$1.25)		300,000
	(To record the purchase of toy trucks)

Table (1)

Prepare the journal entry to record the sales:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash or accounts receivable	9,000,000
	Sales (5,000,000×$1.80)		9,000,000
	(To record the sales)

Table (2)

Prepare the journal entry to record the estimate of total premium liability:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Premium expenses (2)	75,000
	Estimated premium liability		75,000
	(To record the recognition of estimated premium liability)

Table (3)

Working note (1):

Calculate the total box tops estimated for redemption:

Particulars	Amount ($)	Amount ($)
Total box tops outstanding in 2019 (A)	5,000,000
Estimated percent redeemed (B)	60%
Total coupons estimated for redemption (C) (A×B)		$3,000,000

Table (4)

Working note (2):

Calculate the amount of premium expenses:

Premium expense = [Total coupons estimated for redemptionOffer of a toy truck upon return of 10 coupons×(Cost of a toy truck−Collection of cashfrom customers on redemption of 10 coupons)]=3,000,000 coupons10×($1.25−$1.00)=$75,000

Prepare the journal entry to record the redemption of 2,200,000 coupons in 2019:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash (2,200,00010×$1)	220,000
	Estimated premium liability (2,200,00010×$0.25)	55,000
	Inventory of premiums (2,200,00010×$1.25)		275,000
	(To record the redemption of 2,200,000 coupons)

Table (5)

2.

To determine

Identify the manner in which the items related to premium plan would be reported in the balance sheet as of December 31, 2019.

2.

Expert Solution

Explanation of Solution

Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the partial balance sheet as of December 31, 2019.

Company TC
Balance Sheet Statement (Partial)
As at December 31, 2019
Assets	Amount
Current assets:
Inventory of premiums (3)	$25,000

Liabilities	Amount
Current liabilities:
Estimated premium liability (4)	$20,000

Table (6)

Working note (3):

Determine the amount of inventory premium as at December 31, 2019.

Inventory of premiumat December 31, 2019}= [Increase (debit) in inventory of premium in 2019 −Decrease (credit) in inventory of premium in 2019 −]=$300,000−$275,000=$25,000

Working note (4):

Determine the amount of estimated premium liability as at December 31, 2019.

Estimated premium liabilityat December 31, 2019}= [Increase (credit) in estimatedpremium liability in 2019 −Decrease (debit) in estimatedpremium liability in 2019 −]=$75,000−$55,000=$20,000

3.

To determine

Explain the effects on the financial statements if Company TC recorded the premium expense as the coupons were redeemed.

3.

Expert Solution

Explanation of Solution

Effects on the financial statements:

The premium was offered by Company TC to increase the sales and the redemption of coupons is probable and that can be reasonably estimated. Thus, Company TC must record the estimate as an expense and the related liability during the sales period. If the estimate is not made, then the expenses will not match properly against the sales premium. As an effect of this Company TC’s expense would be understated by $20,000. In addition to this, Company TC’s liability will not properly reflect the probable obligation of the company. Thus, Company TC’s liability will be understated by $20,000.

Answer 6

Chapter 9, Problem 20E

1.

To determine

Prepare the journal entries in the books of Company TC for 2019.

1.

Expert Solution

Explanation of Solution

Prepare the journal entry to record the purchase of the toy trucks:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Inventory of premiums	300,000
	Cash (240,000×$1.25)		300,000
	(To record the purchase of toy trucks)

Table (1)

Prepare the journal entry to record the sales:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash or accounts receivable	9,000,000
	Sales (5,000,000×$1.80)		9,000,000
	(To record the sales)

Table (2)

Prepare the journal entry to record the estimate of total premium liability:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Premium expenses (2)	75,000
	Estimated premium liability		75,000
	(To record the recognition of estimated premium liability)

Table (3)

Working note (1):

Calculate the total box tops estimated for redemption:

Particulars	Amount ($)	Amount ($)
Total box tops outstanding in 2019 (A)	5,000,000
Estimated percent redeemed (B)	60%
Total coupons estimated for redemption (C) (A×B)		$3,000,000

Table (4)

Working note (2):

Calculate the amount of premium expenses:

Premium expense = [Total coupons estimated for redemptionOffer of a toy truck upon return of 10 coupons×(Cost of a toy truck−Collection of cashfrom customers on redemption of 10 coupons)]=3,000,000 coupons10×($1.25−$1.00)=$75,000

Prepare the journal entry to record the redemption of 2,200,000 coupons in 2019:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash (2,200,00010×$1)	220,000
	Estimated premium liability (2,200,00010×$0.25)	55,000
	Inventory of premiums (2,200,00010×$1.25)		275,000
	(To record the redemption of 2,200,000 coupons)

Table (5)

Answer 7

Chapter 9, Problem 20E

1.

To determine

Prepare the journal entries in the books of Company TC for 2019.

Answer 8

1.

Expert Solution

Explanation of Solution

Prepare the journal entry to record the purchase of the toy trucks:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Inventory of premiums	300,000
	Cash (240,000×$1.25)		300,000
	(To record the purchase of toy trucks)

Table (1)

Prepare the journal entry to record the sales:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash or accounts receivable	9,000,000
	Sales (5,000,000×$1.80)		9,000,000
	(To record the sales)

Table (2)

Prepare the journal entry to record the estimate of total premium liability:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Premium expenses (2)	75,000
	Estimated premium liability		75,000
	(To record the recognition of estimated premium liability)

Table (3)

Working note (1):

Calculate the total box tops estimated for redemption:

Particulars	Amount ($)	Amount ($)
Total box tops outstanding in 2019 (A)	5,000,000
Estimated percent redeemed (B)	60%
Total coupons estimated for redemption (C) (A×B)		$3,000,000

Table (4)

Working note (2):

Calculate the amount of premium expenses:

Premium expense = [Total coupons estimated for redemptionOffer of a toy truck upon return of 10 coupons×(Cost of a toy truck−Collection of cashfrom customers on redemption of 10 coupons)]=3,000,000 coupons10×($1.25−$1.00)=$75,000

Prepare the journal entry to record the redemption of 2,200,000 coupons in 2019:

Date	Account Titles and Explanations	Debit ($)	Credit ($)
2019	Cash (2,200,00010×$1)	220,000
	Estimated premium liability (2,200,00010×$0.25)	55,000
	Inventory of premiums (2,200,00010×$1.25)		275,000
	(To record the redemption of 2,200,000 coupons)

Table (5)

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

2.

To determine

Identify the manner in which the items related to premium plan would be reported in the balance sheet as of December 31, 2019.

2.

Expert Solution

Explanation of Solution

Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the partial balance sheet as of December 31, 2019.

Company TC
Balance Sheet Statement (Partial)
As at December 31, 2019
Assets	Amount
Current assets:
Inventory of premiums (3)	$25,000

Liabilities	Amount
Current liabilities:
Estimated premium liability (4)	$20,000

Table (6)

Working note (3):

Determine the amount of inventory premium as at December 31, 2019.

Inventory of premiumat December 31, 2019}= [Increase (debit) in inventory of premium in 2019 −Decrease (credit) in inventory of premium in 2019 −]=$300,000−$275,000=$25,000

Working note (4):

Determine the amount of estimated premium liability as at December 31, 2019.

Estimated premium liabilityat December 31, 2019}= [Increase (credit) in estimatedpremium liability in 2019 −Decrease (debit) in estimatedpremium liability in 2019 −]=$75,000−$55,000=$20,000

Answer 13

2.

To determine

Identify the manner in which the items related to premium plan would be reported in the balance sheet as of December 31, 2019.

Answer 14

2.

Expert Solution

Explanation of Solution

Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the partial balance sheet as of December 31, 2019.

Company TC
Balance Sheet Statement (Partial)
As at December 31, 2019
Assets	Amount
Current assets:
Inventory of premiums (3)	$25,000

Liabilities	Amount
Current liabilities:
Estimated premium liability (4)	$20,000

Table (6)

Working note (3):

Determine the amount of inventory premium as at December 31, 2019.

Inventory of premiumat December 31, 2019}= [Increase (debit) in inventory of premium in 2019 −Decrease (credit) in inventory of premium in 2019 −]=$300,000−$275,000=$25,000

Working note (4):

Determine the amount of estimated premium liability as at December 31, 2019.

Estimated premium liabilityat December 31, 2019}= [Increase (credit) in estimatedpremium liability in 2019 −Decrease (debit) in estimatedpremium liability in 2019 −]=$75,000−$55,000=$20,000

Answer 15

2.

Expert Solution

Answer 16

2.

Expert Solution

Answer 17

Expert Solution

Answer 18

3.

To determine

Explain the effects on the financial statements if Company TC recorded the premium expense as the coupons were redeemed.

3.

Expert Solution

Explanation of Solution

Effects on the financial statements:

The premium was offered by Company TC to increase the sales and the redemption of coupons is probable and that can be reasonably estimated. Thus, Company TC must record the estimate as an expense and the related liability during the sales period. If the estimate is not made, then the expenses will not match properly against the sales premium. As an effect of this Company TC’s expense would be understated by $20,000. In addition to this, Company TC’s liability will not properly reflect the probable obligation of the company. Thus, Company TC’s liability will be understated by $20,000.

Answer 19

3.

To determine

Explain the effects on the financial statements if Company TC recorded the premium expense as the coupons were redeemed.

Answer 20

3.

Expert Solution

Explanation of Solution

Effects on the financial statements:

The premium was offered by Company TC to increase the sales and the redemption of coupons is probable and that can be reasonably estimated. Thus, Company TC must record the estimate as an expense and the related liability during the sales period. If the estimate is not made, then the expenses will not match properly against the sales premium. As an effect of this Company TC’s expense would be understated by $20,000. In addition to this, Company TC’s liability will not properly reflect the probable obligation of the company. Thus, Company TC’s liability will be understated by $20,000.

Answer 21

3.

Expert Solution

Answer 22

3.

Expert Solution

Answer 23

Expert Solution

Answer 24

Ch. 9 - Prob. 1GI Ch. 9 - Prob. 2GI Ch. 9 - List the three characteristics of a liability....Ch. 9 - Prob. 4GI Ch. 9 - Prob. 5GI Ch. 9 - Prob. 6GI Ch. 9 - Prob. 7GI Ch. 9 - Prob. 8GI Ch. 9 - How does materiality affect the accounting for...Ch. 9 - Distinguish between an interest-bearing note and a...

Prepare the journal entries in the books of Company TC for 2019.

Prepare the journal entries in the books of Company TC for 2019.

Explanation of Solution

Identify the manner in which the items related to premium plan would be reported in the balance sheet as of December 31, 2019.

Explanation of Solution

Explain the effects on the financial statements if Company TC recorded the premium expense as the coupons were redeemed.

Explanation of Solution

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