Question

Statz 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, 20Y1. Statz provides customers a refund for any returned or damaged merchandise. At the end of 20Y1, Statz Company 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, 20Y2, Buck Co. returned merchandise with an invoice amount of $5,000 for a cash refund. The returned merchandise originally cost Statz Company $3,100.

Answer 1

Answer and Explanation:

Journal Entry Statz Company

a) 31-Dec-2021

Dr Sales (1,800,000*1.5%) $27,000.00

Cr Refunds Payable to Customer $27,000.00

Dr Estimated Returns Inventory $16,000.00

Cr Cost Of Merchandise Sold $16,000.00

b) 3-Feb-2022

Dr Refunds Payable to Customer$5,000.00

Cr Cash $5,000.00

Dr Merchandise Inventory $3,100.00

Cr Estimated Returns Inventory $3,100.00