Refer to the revenue arrangement in E18-16. Assume that instead of selling the tool sets on credit, that Steele sold them for cash.

Instructions

(a) Prepare journal entries for Steele to record (1) the sale on March 10, 2017, (2) the return on March 25, 2017, and (c) any adjusting entries required on March 31, 2017 (when Steele prepares financial statements). Steele believes the original estimate of returns is correct.

(b) Indicate the income statement and balance sheet reporting by Steele at March 31, 2017, of the information related to the Barr sale.

Date

Accounts and Explanation

Debit ($)

Credit ($)

2017

Mar 10

Accounts receivable (200*50)

10,000

Sales revenue

10,000

(To record the sales)

Mar 10

Cost of goods sold (200*30)

6,000

Merchandise inventory

6,000

(To record the cost of goods sold)

Mar 25

Sales returns and allowance (6*50)

300

Accounts receivable

300

(To record the returns)

Mar 25

Merchandise inventory (30*6)

180

Cost of goods sold

180

(To adjust the cogs)

Date

Accounts and Explanation

Debit ($)

Credit ($)

2017

Mar 31

Sales returns and allowance (4*50)

200

Accounts receivable

200

(To record the estimated sales returns)

Mar 31

Estimated inventory returns (4*30)

120

Cost of goods sold

120

(To record the estimated reversal)

Income Statement (Partial)

Particulars

Amount ($)

Sales (200*50)

10,000

Less: Sales returns and allowance [(50*6)+(50*4)]

(500)

Net sales

9,500

Less: Cost of goods sold (6000-180-120)

(5,700)

Gross Profit

3,800

Balance Sheet (Partial)

Particulars

Amount ($)

Current Assets

Accounts receivables (10,000-300)

9,700

Less: Sales returns and allowance

(180)

Accounts receivables, Net

9,520