C Ola Secure! https platform/mod/quiz/attempt.php attempt-16865628page-8 Points

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C Ola Secure! https platform/mod/quiz/attempt.php attempt-16865628page-8 Points aut ar 1200 Rag New Revenue Recognition Standard-Adjusting journal Entries-Sales Returns and Allowances During the year, Reed Company sells merchandise on account totaling $12,000,000 (the cost to Reed for this merchandise was $4,800,000). Reed allows a 60-day return prvmlege for the merchandise It sells. At year-end, Reed estimates there remain $2,100,000 of sales (with a cost to Reed of $840,000) that are still within the 60-day return period. Based on past experience, Reed expects 5 percent of this merchandise to be returned. Prepare the perlod-end adjusting journal entries needed for Reed Company to comply with the new revenue recognition standard. Reeds fiscal year-end is December 31 General Journal Debit Credit To record estimated return of sales still eligble for return To record the cost of merchandise sold for sales still eligble for return Please answer all parts of the question 11 5 6

Explanation / Answer

Working Notes: Estiamted Sales return Value Sales within 60-Day credit Period = $21,00,000 5% of this sales eligible for return = $1,05,000 Estimated Cost of sales return value = Cost of the sales of $ 21,00,000 = $8,40,000 5% of the cost = $42,000 Journal Entries Sr. No. Date Account Title and explanation Debit Credit 1 ------ Account Receivable $1,05,000        To Estimated Sales Return $1,05,000 (to record the estimated return of sales still eligible for return) 2 ------ Cost of sales of estimated returns $42,000         To Inventory - Right of Return $42,000 (To record the cost of merchandise sold for sales still eligible for returns)

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