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.
The total of debits and credits is $2,560.
In accounting, the term sales returns denote the goods returned by the customers to the business entity due to damages or defects. Sales returns are reported differently under periodic and perpetual inventory systems.
Accounts and Explanation
Sales revenue (80,000*2%)
(To record the estimated returns)
Estimated returns inventory
Cost of goods sold (48,000*2%)
(To record the cost of goods sold)
Clink Electric uses the periodic inventory system. Clink reported the following selected amounts at May 31, 2018:
Merchandise Inventory, June 1, 2017 $ 16,000 Freight In $ 6,000
Merchandise Inventory, May 31, 2018 21,500 Net Sales Revenue 138,000
Purchases 81,000 Common Stock 32,000
Purchase Discounts 3,000 Retained Earnings 17,000
Purchase Returns and Allowances 6,600
Compute the following for Clink:
a. Cost of goods sold.
b. Gross profit.
Journalize the following transactions that occurred in January 2018 for Sylvia’s Amusements. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Sylvia estimates sales returns at the end of each month.
Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, $7,000. Terms 1/10, n/EOM, FOB shipping point.
6 Paid freight bill of $100 on January 4 purchase.
8 Returned half the inventory purchased on January 4 from Vanderbilt Company.
10 Sold merchandise inventory for cash, $1,600. Cost of goods, $640. FOB destination.
11 Sold merchandise inventory to Graceland Corporation, $10,800, on account, terms of 1/10, n/EOM. Cost of goods, $5,400. FOB shipping point.
12 Paid freight bill of $60 on January 10 sale.
13 Sold merchandise inventory to Cabbell Company, $9,500, on account, terms of n/45. Cost of goods, $5,225. FOB shipping point.
14 Paid the amount owed on account from January 4, less return and discount.
17 Received defective inventory as a sales return from the January 13 sale, $600. Cost of goods, $300.
18 Purchased inventory of $4,600 on account from Roberts Corporation. Payment terms were 3/10, n/30, FOB destination.
20 Received cash from Graceland Corporation, less discount.
26 Paid amount owed on account from January 18, less discount.
28 Received cash from Cabbell Company, less return.
29 Purchased inventory from Sandra Corporation for cash, $11,600, FOB shipping point. Freight in paid to shipping company, $240.
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