Answer:
account receivable 686,000 debit
sales revenue 686,000 credit
--to record the sale--
Cost of goods sold 528,220 debit
Inventory 528,220 credit
--to record cost of goods sold--
warrant expense 102,900 debit
warrant liablity 102,900 credit
--to record expected returns--
warrant liability 75,000 debit
account receivable 75,000 credit
--to record actual returns--
Step-by-step explanation:
The sale of the CDs will be recorded like a common sale, but we will also stablish a warrant liability for returns:
This is done to match the expense of the returned CD's to the period of the sales which generated this returns:
warrant liablity 15% of 686,000 = 102,900
then, when actual returns ocurs: we will decrease the account receivable of the customer.