Question

tatz Company had sales of $1,800,000 and related cost of goods sold of $1,150,000 for its first year of operations ending December 31. Statz provides customers a refund for any returned or damaged merchandise. At the end of the year, Statz estimates that customers will request refunds for 1.5% of sales and estimates that merchandise costing $16,000 will be returned. Assume that on February 3 of the following year, Buck Co. returned merchandise with a selling price of $5,000 for a cash refund. The returned merchandise originally cost Statz $3,100. a. Journalize the adjusting entries on December 31 to record the expected customer returns.

Answer 1

Step-by-step explanation:

a. 2019

Dec 31 sales ($1,800,00 x 1.5%) 27,000

Customer Refunds Payable 27,000

31 Estimated Returns Inventory 16,000

Cost of Merchandise Sold 16,000

b 2020

Feb 3 Customer Refunds Payable 5,000

Cash 5,000

3 Merchandise Inventory 3,100

Estimated Returns Inventory 3,100