Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 5: Q5SE (page 296)

On December 31, Jack Photography Supplies estimated that approximately 2% of merchandise sold will be returned. Sales Revenue for the year was \(80,000 with a cost of \)48,000. Journalize the adjusting entries needed to account for the estimated returns.

Short Answer

Expert verified

Answer

The total of debits and credits is$2,560.

Step by step solution

01

Meaning of Sales Returns

In accounting, the term sales returns denote thegoods returned by the customersto the business entity due todamages or defects.Sales returns are reported differently under periodic and perpetual inventory systems.

02

Preparation of adjusting journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Dec 31

Sales revenue (80,000*2%)

1,600

Refunds payable

1,600

(To record the estimated returns)

Dec 31

Estimated returns inventory

Cost of goods sold (48,000*2%)

960

(To record the cost of goods sold)

960

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Journalize the following transactions that occurred in September 2018 for Cardinal. Assume Cardinal uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Sep. 3 Purchased merchandise inventory on account from Sherry Wholesalers, \(4,000. Terms 1/15, n/EOM, FOB shipping point.

4 Paid freight bill of \)75 on September 3 purchase.

4 Purchased merchandise inventory for cash of \(1,900.

6 Returned \)1,100 of inventory from September 3 purchase.

8 Sold merchandise inventory to Houston Company, \(5,500, on account. Terms 3/15, n/35. Cost of goods, \)2,365.

9 Purchased merchandise inventory on account from Tarin Wholesalers, \(12,000. Terms 3/10, n/30, FOB destination.

10 Made payment to Sherry Wholesalers for goods purchased on September 3, less return and discount.

13 After negotiations, received a \)200 allowance from Tarin Wholesalers.

15 Sold merchandise inventory to Java Company, \(3,300, on account. Terms 2/10, n/EOM. Cost of goods, \)1,320.

22 Made payment, less allowance, to Tarin Wholesalers for goods purchased on September 9.

25 Sold merchandise inventory to Smecker for \(1,900 on account that cost \)722. Terms of 1/10, n/30 were offered, FOB shipping point. As a courtesy to Smecker, $85 of freight was added to the invoice for which cash was paid by Cardinal.

28 Received payment from Houston Company.

29 Received payment from Smecker, less discount.

30 Received payment from Java Company.

Journalize the following transactions that occurred in September 2018 for Aquamarines. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Aquamarines estimates sales returns at the end of each month.

Sep. 3 Purchased merchandise inventory on account from Sharpner Wholesalers, \(5,500. Terms 2/15, n/EOM, FOB shipping point.

4 Paid freight bill of \)85 on September 3 purchase.

4 Purchased merchandise inventory for cash of \(1,600.

6 Returned \)1,300 of inventory from the September 3 purchase.

8 Sold merchandise inventory to Herman Company, \(5,700, on account. Terms 2/15, n/35. Cost of goods, \)2,565.

9 Purchased merchandise inventory on account from Tucker Wholesalers, \(6,000. Terms 3/10, n/30, FOB destination.

10 Made payment to Sharpner Wholesalers for goods purchased on September 3, less return and discount.

12 Received payment from Herman Company, less discount.

13 After negotiations, I received a \)500 allowance from Tucker Wholesalers.

15 Sold merchandise inventory to Jerome Company, \(2,800, on account. Terms n/EOM. Cost of goods, \)1,200.

22 Made payment, less allowance, to Tucker Wholesalers for goods purchased on September 9.

23 Jerome Company returned \(200 of the merchandise sold on September 15. Cost of goods, \)80.

25 Sold merchandise inventory to Small for \(1,800 on account that cost \)738. Terms of 3/10, n/30 was offered, FOB shipping point. As a courtesy to Small, $40 of freight was added to the invoice, for which Aquamarines paid cash.

29 Received payment from Small, less discount.

30 Received payment from Jerome Company, less return.

Journalize the following sales transactions for Sierra Tractors. Explanations are not required.

June 5 Sierra sold \(20,000 of inventory on account, credit terms are 4/10, n/30. Cost of goods is \)10,000. Sierra uses the gross method to record sales revenue.

12 Sierra receives payment from the customer on the amount due, less the discount.

Journalize the following sales transactions for King Company. Explanations are not required.

Apr. 1 King Company sold merchandise inventory for \(150. The cost of the inventory was \)90. The customer paid cash. King Company was running a promotion and the customer received a \(20 award at the time of sale that can be used at a future date on any King Company merchandise.

May 15 The customer uses the \)20 award when purchasing merchandise inventory for \(30. The cost of the inventory was \)18. The customer paid cash.

Consider the following transactions for Toys and More:

May 8 Toys and More buys \(113,300 worth of MegoBlock toys on account with credit terms of 2/10, n/60.

12 Toys and More returns \)11,250 of the merchandise to MegoBlock due to damage during shipment.

15 Toys and More paid the amount due, less the return and discount.

Requirements

1. Journalize the purchase transactions. Explanations are not required.

2. In the final analysis, how much did the inventory cost Toys and More?
See all solutions

Recommended explanations on Business Studies Textbooks

Managers

Read Explanation

Human Resources

Read Explanation

Strategic Direction

Read Explanation

Influences On Business

Read Explanation

Financial Performance

Read Explanation

Nature of Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free