Brief Exercise 7-6 Sales returns [LO7-4] During 2018, Its first year of operatio

Question

Brief Exercise 7-6 Sales returns [LO7-4] During 2018, Its first year of operations, Hollis Industries recorded sales of $10,000,000 and experienced returns of $730,000. Cost of goods sold totaled $6,500,000 (65% of sales). The company estimates that 9% of all sales will be returned. all accounts receivable are outstanding. (If no entry is required for a transaction/event, select "No Journal entry required" In the first account field.) Journal entry worksheet Record the anticipated sales returns. Event General Jou

Explanation / Answer

(1)

Event

General Journal

Debit

Credit

1

Sales Return

170000

Refund Liability

170000

Estimated Returns = 10000000 * 9% = 900000

Less :-Actual Returns = 730000

Remaining Estimated Returns = 170000

(2)

Event

General Journal

Debit

Credit

1

Inventory Estimated Returns

110500

Cost of Goods Sold

110500

COGS = 170000 * 65% = 110500

Event

General Journal

Debit

Credit

1

Sales Return

170000

Refund Liability

170000

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