Posted: July 16th, 2021

Premium entries to stimulate the sales of its alladin breakfast

Premium Entries to stimulate the sales of its Alladin breakfast cereal, Loptien Company places 1 coupon in each box. Five coupons are redeemable for a premium consisting of a children’s hand puppet. In 2011, the company purchases 40,000 puppets at $1.50 each and sells 480,000 boxes of Alladin at $3.75 a box. From its experience with other similar premium offers, the company estimates that 40% of the coupons issued will be mailed back for redemption. During 2011, 115,000 coupons are presented for redemption. Prepare the journal entries that should be recorded in 2011 relative to the premium plan.

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