Question

Botanic choice sell natural supplements to customers with an unconditional right of return if they are not satisfied. The right of returns extends 60 days. Based on experience, estimated returns are expected to be 20% all sales are paid in cash. On February 10, 2014, a customer purchases $3,000 of products (cost1,500).

Required:
Prepare the journal entry to rexcord the sale and the cost of goods sold.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

Cash Dr, $3,000

Cost of goods sold Dr, $1,500

Estimated inventory returns Dr, 600 ($3,000 × 20%)

To Inventory $1,500

To Refund liability $600

To Sales revenue $3,000

(Being cost of goods sold is recorded)

Here the sale and the cost of goods sold is recorded in which some accounts are debited and some are credited