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P13-9 Sycamore Candy Company offers a CD single as a premium

Price: $2.50


Sycamore Candy Company offers a CD single as a premium for every 5 candy bar wrappers presented by customers together with $2.50. The candy bars are sold by the company to distributors for $0.30 cents each. The purchase price of each CD to the company is $2.25 in addition, it costs $0.50 cents to mail each CD. The results of the premium plan for the years 2012 and 2013 are as follows. (All purchases and sales are for cash.)

   2,012  2,013
CDs purchased  250,000 330,000
Candy bars sold  2,895,400 2,743,600
Wrappers redeemed  1,200,000 1,500,000
2012 wrappers expected to be redeemed in 2013  290,000
2013 wrappers expected to be redeemed in 2014  350,000

Instructions
(a) Prepare the journal entries that should be made in 2012 and 2013 to record the transactions related to
the premium plan of the Sycamore Candy Company.
(b) Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the balance sheet and the income statement at the end of 2012 and 2013.

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