Halifax Manufacturing allows its customers to return merchandise for any reason

Question

Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2018 with an allowance for sales returns of $340,000. During 2018, Halifax sold merchandise on account for $11,900,000. This merchandise cost Halifax $7735,000 65% of selling prices . Also during the year, customers returned $580000 n sales for credit. Sales returns. estimate to be 5% of sales, are recorded as an adjusting entry at the end of the year. Required: 1. Prepare an entry to record actual merchandise returns as they occur (not adjusting the allowance for sales returns), and then record a year-end entry to adjust the allowance for sales returns to its appropriate balance. 2. What is the amount of the year-end allowance for sales returns after the adjusting entry is recorded? Complete this question by entering your answers in the tabs below Required 1 Required 2 Prepare an entry to record actual merchandise returns as they occur (not adjusting the allowance for sales returns), and then ra transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

1) Journal Entries :-

Working Note 1 :-

Allowance for Sales Returns = ($11900000 * 5%) - $580000

= $595000 - $580000

= $15000

2) Ending Balance of allowance for sales returns = Beginning Balance + Year end adjustment

= $340000 + $15000

= $355000

Date Particulars Debit($) Credit($) a) Sales Returns A/c Dr. 580000 To Accounts Receivable A/c 580000 b) Inventory A/c Dr. ($580000*65%) 377000 To Cost of Goods sold A/c 377000 c) Sales Returns A/c Dr. (Working Note 1) 15000 To Allowance for Sales Return A/c 15000 d) Inventory Estimated Returns A/c Dr. 9750 To Cost of Goods Sold a/c ($15000*65%) 9750

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.