Kane Candy Company Offers a Coffee Mug as a Premium

Kane 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 $1.80; in addition it costs $1.20 to mail each mug. The results of the premium plan for the years 2014 and 2015 are as follows (assume all purchases and sales are for cash):
Instructions
(a) Prepare the general journal entries that should be made in 2014 and 2015 related to the above plan by Kane Candy.
(b) Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the Kane Candy Company balance sheet and income statement at the end of 2014 and 2015.

Correct Answer:

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