Question

Stossel Company sells 300 units for $200 each to Liberty Inc. for cash. Stossel allows Liberty to return any unused product within 30 days and receive a full refund. The cost of each product is $120. Stossel estimates that ten units will be returned, the costs of recovering the units will be immaterial, and the returned units are expected to be resold at a profit. What amount of Sales Returns and Allowances should Stossel record in the year of the sale?(a)$2,000.(b)$0.(c)$800.(d)$1,200.

Answer 1

Option A.

Step-by-step explanation:

The given information about the Stossel Company is

Selling price per unit = $200

Cost of each product = $120

Estimated return = 10 units

Sales Returns and Allowances = (Estimated return) x (Selling price per unit )

Substitute the given values in the above formula.

Sales Returns and Allowances = (10) x ($200)

= $2,000

The amount of Sales Returns and Allowances should Stossel record in the year of the sale is $2,000.

Therefore, the correct option is A.