Answer:
The journal entries for the premium offer for 2016 would be as follows:
Debit Credit
Pemium Expenses A/C dr. $800,000
Current Liabilty $800,000
Prize A/C dr. $480,000
Cash $480,000
Current Liabilty A/C dr. $224,000
Prize $224,000
Explanation:
In order to record the journal entries for the premium offer for 2016, we need to calculate first the amount of the premium expenses as follows:
Pemium Expenses A/C dr=($2,000,000/5)*2=$800,000
Therefore journal entries for the premium offer for 2016 would be as follows:
Debit Credit
Pemium Expenses A/C dr. $800,000
Current Liabilty $800,000
Prize A/C dr. $480,000
Cash $480,000
Prize=$560,000/5*2=$224,000
Current Liabilty A/C dr. $224,000
Prize $224,000
