Question

Blossom Choice sells natural supplements to customers with an unconditional sales return if they are not satisfied. The sales returns period extends 60 days. On February 10, 2018, a customer purchases $2700 of products (cost $1350). Assuming that based on prior experience, estimated returns are 10%. The journal entry to record the actual return of $120 of merchandise includes a

Answer 1

Debit to Returned Inventory for $60

Step-by-step explanation:

The journal entries are as follows;

a. Sales Returns and Allowance A/c Dr $120

........................ To Account Receivable Cr $120

(To record the account receivable)

b. Returned inventory A/c Dr $60

.......................... To Cost of goods sold Cr $60

(To record the actual return)

Workings;

Returned inventory = $120 × (1,350 ÷ 2,700) = $60