Question

Smart Touch Learning had sales revenue of $ 500,000 and cost of goods sold of $ 300,000 for the period. Historical data suggests that 3​% of these sales will be returned to Smart Touch Learning. Record the adjusting entries to estimate sales returns at​ year-end would.

Answer 1

To account for estimated sales returns for Smart Touch Learning, calculate 3% of sales revenue to determine the expected returns ($15,000), then debit Sales Returns and Allowances and credit Accounts Receivable by this amount.

Step-by-step explanation:

The question pertains to accounting, specifically related to estimating sales returns for Smart Touch Learning at year-end. Given the sales revenue of $500,000 and the cost of goods sold $300,000, we anticipate a 3% return rate on the sales. To record the adjusting entries for sales returns, we calculate 3% of $500,000, which amounts to $15,000. The entries would be a debit to Sales Returns and Allowances for $15,000 and a credit to Accounts Receivable for the same amount.

To summarize the steps:

1. Calculate the estimated sales returns: 3% of $500,000 = $15,000.
2. Debit Sales Returns and Allowances for $15,000.
3. Credit Accounts Receivable for $15,000.

This entry will reduce both the net sales and the accounts receivable by the amount of sales expected to be returned, providing a more accurate financial picture at year-end.