Uddin Publishing Co. publishes college textbooks that are sold to bookstores on
ID: 2418363 • Letter: U
Question
Uddin Publishing Co. publishes college textbooks that are sold to bookstores on the following terms. Each title has a fixed wholesale price, terms f.o.b. shipping point, and payment is due 60 days after shipment. The retailer may return a maximum of 30% of an order at the retailer’s expense. Sales are made only to retailers who have good credit ratings. Past experience indicates that the normal return rate is 12%, and the average collection period is 72 days.
A. On July 1, 2014, Uddin shipped books invoiced at $16,800,000 (cost $13,440,000). Prepare the journal entry to record this transaction.
B. On October 3, 2014, $1.5 million of the invoiced July sales were returned according to the return policy, and the remaining $15.30 was paid. Prepare the journal entries for the return and payment.
Explanation / Answer
PART A DR CR Accounts Receivable 1,68,00,000 Sales Revenue-Texts 1,68,00,000 Uddin shipped books invoiced at $16,800,000 Cost of goods sold 13440000 Inventory 13440000 cost of goods sold $13,440,000 Sales Returns 2016000 Allowance for Sales Returns . 2016000 normal return rate is 12% PART B Allowance for Sales Returns 2016000 Accounts Receivable 1500000 Sales Returns 516000 Cash 1,53,00,000 Accounts Receivable 1,53,00,000 Cash received from sales
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