Question

tatz Company had sales of $1,800,000 and related cost of goods sold of $1,150,000 for its first year of operations ending December 31. Statz provides customers a refund for any returned or damaged merchandise. At the end of the year, Statz estimates that customers will request refunds for 1.5% of sales and estimates that merchandise costing $16,000 will be returned. Assume that on February 3 of the following year, Buck Co. returned merchandise with a selling price of $5,000 for a cash refund. The returned merchandise originally cost Statz $3,100. a. Journalize the adjusting entries on December 31 to record the expected customer returns.

Answer 1

Answer:

Explanation:

a. 2019    

Dec   31 sales ($1,800,00 x 1.5%)        27,000  

  Customer Refunds Payable                      27,000

     

   31 Estimated Returns Inventory 16,000  

  Cost of Merchandise Sold                      16,000

     

b 2020    

Feb 3 Customer Refunds Payable        5,000  

  Cash                                                       5,000

     

 3 Merchandise Inventory                 3,100  

             Estimated Returns Inventory         3,100