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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

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Most popular questions from this chapter

What is freight out and how is it recorded by the seller?

Journalize the following transactions for Master Bicycles using the periodic inventory system. Explanations are not required.

Nov. 2 Purchased \(3,400 of merchandise inventory under terms 2/10, n/EOM, and FOB shipping point.

6 Returned \)800 of defective merchandise purchased on November 2.

8 Paid freight bill of \(100 on November 2 purchase.

10 Sold merchandise inventory on account for \)6,100. Payment terms were 3/15, n/45.

11 Paid amount owed on credit purchase of November 2, less the return and the discount.

22 Received cash from November 10 customer in full settlement of their debt, less the discount.

D & T Printing Supplies鈥� accounting records include the following accounts at December 31, 2018.

Purchases \( 185,200 Accumulated Depreciation鈥擝uilding \) 21,000

Accounts Payable 7,700 Cash 18,100

Rent Expense 8,600 Sales Revenue 257,800

Building 42,800 Depreciation Expense鈥擝uilding 4,700

Common Stock 55,000 Dividends 26,500

Retained Earnings 30,400 Interest Expense 1,900

Merchandise Inventory,

Beginning 119,000 Merchandise Inventory,

Ending 102,100

Notes Payable 11,300 Purchase Returns and Allowances 20,700

Purchase Discounts 2,900

Requirements

1. Journalize the required closing entries for D & T Printing Supplies assuming that D & T uses the periodic inventory system.

2. Determine the ending balance in the Retained Earnings account.

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Requirements

1. Journalize Tarin Wholesaler鈥檚 November transactions.

2. Journalize Cain Company鈥檚 November transactions.

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