Question

On March 10, 2020, Pharoah Company sold to Barr Hardware 160 tool sets at a price of $50 each (cost $30 per set) with terms of n/60, f.o.b. shipping point. Pharoah allows Barr to return any unused tool sets within 60 days of purchase. Pharoah estimates that (1) 10 sets will be returned, (2) the cost of recovering the products will be immaterial, and (3) the returned tools sets can be resold at a profit. On March 25, 2020, Barr returned 7 tool sets and received a credit to its account. Assume that instead of selling the tool sets on credit, that Pharoah sold them for cash.

(a)

Partially correct answer iconYour answer is partially correct.

Prepare journal entries for Pharoah to record (1) the sale on March 10, 2020, (2) the return on March 25, 2020, and (3) any adjusting entries required on March 31, 2020 (when Pharoah prepares financial statements). Pharoah believes the original estimate of returns is correct. (Credit account titles are automatically indented when the 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.)

No.	Account Titles and Explanation	Debit	Credit
(1)
	(To record cash sales)
	(To record cost of goods sold)
(2)
	(To record sales returns)
	(To record cost of goods returned)
(3)
	(Adjusting entry for sales returns)
	(Adjusting entry for cost of goods sold)

Answer 1

Answer
Date	Accounts Titles & Explanation	Debit	Credit
March 10, 2020	Accounts Receivable (160 units * $50)	$     8,000
	Sales Revenue		$     8,000
	(To record sales)
	Cost of Goods Sold (160 units * $30)	$     4,800
	Inventory		$     4,800
	(To record cogs)
March 25, 2020	Sales Returns and Allowances	$        350
	Accounts Receivable (7 units * $50)		$        350
	(To record sales returned)
	Returned Inventory	$        210
	Cost of Goods Sold (7 units * $30)		$        210
	(To record cogs)
March 31, 2020	Sales Returns & Allowances (7 units * $50)	$        350
	Allowance for Sales Returns & Allowances		$        350
	(To record adjusting entry for sales returns)
	Estimated Inventory Returns	$        210
	Cost of Goods Sold (7 units * $30)		$        210
	(To record adjusting entry for cogs)