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19 January, 01:16

Wynn Company offers a set of building blocks to customers who send in 3 UPC codes from Wynn cereal, along with 50 cents. The blocks sets cost Wynn $1.10 each to purchase and 60 cents each to mail to customers.

During, 20XX, Wynn sold 1,200,000 boxes of cereal. The company expects 30% of the UPC codes to be sent in. During 20XX, 120,000 UPC codes were redeemed.

Prepare Wynn's Dec 31, 20XX, adjusting entry.

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  1. 19 January, 04:40
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    the entry is a provision in expenses: 96,000 debit (expenses provisions), 96,000 credit (liabilities accruals)

    Explanation:

    The total UPC codes that Wynn Company expects to redeem is 360,000. If 120,000 were redeemed, that 240,000 are pending to redeem. In terms of blocks, it means 80,000 pending to purchase and send to customers (240,000/3=80,000). The total net cost for those blocks is $96,000, as follows: total cost = 1.1+0.6-0.5=1.2 and then multiply for the number of blocks: 80,000*1.2 = $96,000. Finally, the entry is a provision in expenses: 96,000 debit (expenses provisions), 96,000 credit (liabilities accruals)
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