Pido, Rea Lee Joy U.
1.The Tyler Corporation embarked on a promotional program whereby a “T” shirt costing
P150 each is given away for every 100 bottle crowns returned plus P50. Tyler Corporation estimates that
only 40% of the bottle crowns in the hands of consumers will be presented for redemption. The
following information is available to you:
Quantity Amount
Bottles sold 1,000,000 P 5,000,000
“T” shirts bought for giveaway 1,500
“T” shirts distributed to customers 1,000
Required:
Prepare journal entries to record the following:
a. Purchase of premiums
Premium inventory 225,000
Cash/accounts payable 225,000
(1,500x150)
b. Redemption of premiums
Premium expense (1,000x100) 100,000
Cash (1,000x50) 50,000
Premium inventory 150,000
c. Year-end adjustment to establish estimated liability for outstanding premiums
Premium expense 300,000
Estimated liability for Premium outstanding 300,000
(40%x1, 000,000) 100= 4,000 (4,000 – 1,000) x 100=300,000
2.Fillmore Company started selling a new product that carried a two-year warranty against defects.
Based upon past experience with other products, the estimated warranty costs related to peso sales are
computed as follows:
First year warranty 3%
Second year warranty 5%
Total sales and actual warranty repairs for 2015 and 2016 are given below:
2015 2016
1.The Tyler Corporation embarked on a promotional program whereby a “T” shirt costing
P150 each is given away for every 100 bottle crowns returned plus P50. Tyler Corporation estimates that
only 40% of the bottle crowns in the hands of consumers will be presented for redemption. The
following information is available to you:
Quantity Amount
Bottles sold 1,000,000 P 5,000,000
“T” shirts bought for giveaway 1,500
“T” shirts distributed to customers 1,000
Required:
Prepare journal entries to record the following:
a. Purchase of premiums
Premium inventory 225,000
Cash/accounts payable 225,000
(1,500x150)
b. Redemption of premiums
Premium expense (1,000x100) 100,000
Cash (1,000x50) 50,000
Premium inventory 150,000
c. Year-end adjustment to establish estimated liability for outstanding premiums
Premium expense 300,000
Estimated liability for Premium outstanding 300,000
(40%x1, 000,000) 100= 4,000 (4,000 – 1,000) x 100=300,000
2.Fillmore Company started selling a new product that carried a two-year warranty against defects.
Based upon past experience with other products, the estimated warranty costs related to peso sales are
computed as follows:
First year warranty 3%
Second year warranty 5%
Total sales and actual warranty repairs for 2015 and 2016 are given below:
2015 2016
