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Paige Candy Company offers a coffee mug as a premium for every ten 50-cent candy bar wrappers presented by customers together with $1.00. The purchase price of each mug to the company is 90 cents; in addition it costs 60 cents to mail each mug. The results of the premium plan for the years 2010 and 2011 are as follows(assume all purchases and sales are for cash):2010 2011Coffee mugs purchased 720,000 800,000Candy bars sold 5,600,000 6,750,000Wrappers redeemed 2,800,000 4,200,0002010 wrappers expected to be redeemed in 2011 2,000,0002011 wrappers expected to be redeemed in 2012 2,700,000(a) Prepare the general journal entries that should be made in 2010 and 2011 related to the above plan by Paige Candy.
(b) Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the Paige Candy Company balance sheet and income statement at the end of 2010 and 2011.
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