Prepare the journal entries related to the sale of frozen yogurt and the cash rebate offer for 2017 and 2018.

On January 1, 2017, Fro-Yo Inc. began offering customers a cash rebate of $5.00 if the customer mails in 10 proof-of-purchase labels from its frozen yogurt containers. Based on historical experience, the company estimates that 20% of the labels will be redeemed. During 2017, the company sold 5,000,000 frozen yogurt containers at $1, cash, per container. From these sales, 800,000 labels were redeemed in 2017, 150,000 labels were redeemed in 2018, and the remaining labels were never redeemed.

Required:

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1. Prepare the journal entries related to the sale of frozen yogurt and the cash rebate offer for 2017 and 2018.
2. Next Level Assume that 300,000 labels were redeemed in 2018. Prepare the journal entries related to the cash rebate offer for 2018.
CHART OF ACCOUNTS
Fro-Yo Inc.
General Ledger
ASSETS
111 Cash
121 Accounts Receivable
141 Inventory
152 Prepaid Insurance
181 Equipment
189 Accumulated Depreciation
LIABILITIES
211 Accounts Payable
231 Salaries Payable
242 Estimated Rebate Liability
250 Unearned Revenue
261 Income Taxes Payable
EQUITY
311 Common Stock
331 Retained Earnings
REVENUE
411 Sales Revenue
EXPENSES
500 Cost of Goods Sold
511 Insurance Expense
512 Utilities Expense
521 Salaries Expense
532 Bad Debt Expense
540 Interest Expense
541 Depreciation Expense
559 Miscellaneous Expenses
910 Income Tax Expense

Prepare the necessary journal entries to record:

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1. the sale of Fro-Yo containers for cash during 2017
2. the redemption of labels during 2017
3. the redemption of labels during 2018
4. the recognition of the unredeemed labels at the end of 2018
Additional Instructions

PAGE 9

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT
1
2
3
4
5
6
7
8
9

Next Level

Assume that 300,000 labels were redeemed in 2018. Prepare the journal entries related to the cash rebate offer for 2018.

PAGE 9

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT
1
2
3

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