Question

Skysong-Air is selling a new model of high-efficiency air conditioner. To stimulate interest, Skysong-Air is granting certain large customers the unconditional right to return these air conditioners if not fully satisfied. The right of return extends for six months. Skysong-Air estimates returns of 9%. Skysong-Air sells these air conditioners on account for $18,630,000 (cost $12,109,500) on April 2, 2017. Customers are required to pay the full amount due by June 15, 2017.

Prepare the journal entry for Skysong-Air on April 2, 2017. Use the gross method to record sales. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Assume that on May 15, 2017 one customer returns air conditioners that it purchased from Skysong-Air for $417,000. Prepare the journal entry to record this transaction and the receipt of cash from customers on June 15, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Assume Skysong-Air prepares financial statements quarterly. Prepare the necessary entries (if any) to adjust Skysong-Air’s financial results for the above transactions on June 30, 2017, assuming remaining expected returns of $1,330,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Repeat parts (a) through (c) above assuming Skysong-Air uses the net method to record sales. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Skysong-Air sells these air conditioners on account for $18,630,000 (cost $12,109,500) on April 2, 2017. Customers are required to pay the full amount due by June 15, 2017.

Prepare the journal entry for Skysong-Air on April 2, 2017.

Date	Details	Debit ($)	Credit($)
2-4-2017	Debtors Dr	18,630,000
	sales Cr		18,630,000

Assume that on May 15, 2017 one customer returns air conditioners that it purchased from Skysong-Air for $417,000. Prepare the journal entry to record this transaction and the receipt of cash from customers on June 15, 2017

Date	Details	debit ($)	credit($)
15-5-2017	Sales return Dr	417000
	Debtor Cr		417000
15-06-2017	Cash/Bank Dr	18213000
			18213000

Assume Skysong-Air prepares financial statements quarterly. Prepare the necessary entries (if any) to adjust Skysong-Air’s financial results for the above transactions on June 30, 2017, assuming remaining expected returns of $1,330,000

Date	Details	debit ($)	credit($)
30-6-2017	Sales return Dr	1330000
	Debtor Cr		1330000