Paramount Trading Co. sells watches to retailers with the right of return. Based
ID: 2481755 • Letter: P
Question
Paramount Trading Co. sells watches to retailers with the right of return. Based on past experience Paramount estimates 20% returns of the annual sales. The Sales and returns data of Paramount for the year 2013 is given here.
Total Sales for 2013 $5,000,000
2012 sales collected in 2013 $250,000
Credit granted for 2013 sales returns $700,000
2012 sales returned in 2013 $ 20,000
What amount of sales revenue should Paramount recognize for 2013. Prepare journal entries for sales and sales returns of 2013.
Explanation / Answer
Total sales 5,000,000 SR 1,000,000 Journal Debit credit Accounts receivable 5,000,000 Sales revenue 5,000,000 Sales returns 1,000,000 Accounts receivable 1,000,000
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