Sweets Candy Company offers a coffee mug as a premium for every ten $1 candy bar wrappers presented by customers together with $2. The purchase price of each mug to the company is $2.40; in addition it costs $1.60 to mail each mug. The results of the premium plan for the years 2017 and 2018 are as follows (assume all purchases and sales are for cash):
|
2017 |
2018 |
| Coffee mugs purchased |
720,000 |
800,000 |
| Candy bars sold |
5,600,000 |
6,750,000 |
| Wrappers redeemed |
2,800,000 |
4,200,000 |
| 2017 wrappers expected to be redeemed in 2018 |
2,000,000 |
|
| 2018 wrappers expected to be redeemed in 2019 |
|
2,700,000 |
Instructions:
(a) Prepare the general journal entries that should be made in 2017 and 2018 related to the above plan by Sweets Candy.
(b) Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the Sweets Candy Company balance sheet and income statement at the end of 2017 and 2018.