Question

For the year ended December​ 31, 2019, Davidson Mart had sales of​ $800,000 and cost of goods sold of​ $600,000. Davidson estimates that approximately​ 2% of the merchandise sold will be returned. The adjusting journal entry on December​ 31, 2019, would include a​ _____.

Answer 1

800,000/600,000=1.33

Profit percentage = 1.33-1=0.33=33%

0.02*800,000=16,000 worth of goods returned

Profit= 0.33*16,000=5280

COGS= 16,000-5280=10,720

Adjusting Entry

Debit Credit

Goods returned 10,720

Profit 5,280

Cash 16,000

Step-by-step explanation: