Question

A local college enters into an agreement with a Bookstore, which will distribute that college press books. According to the contract, The bookstore has the right to return any unsold books no later than 24 weeks after sale.

On February 1, 2020, The Press (The college) sold on credit 300 books for $150 each to that Bookstore. The cost of each book is $70. The Press estimates that 50 of the books sold to the bookstore will be returned. On June 4, 35 books were returned.

Required:

As The Press's accountant, write the journal entries to record the sale, the return of 35 books and the expiry of the right of return

Answer 1

	Date	Particulars	Dr($)	Cr($)
at time of sale	Feb 1, 2020	Accounts Receivable	$        45,000
		Sales Revenue		$        45,000
		(To record sale of books on credit 300 books x $150=$45,000)
	Feb 1, 2020	Cost of Goods Sold	$        21,000
		Merchandise Inventory		$        21,000
		(To record cost of goods sold for books 300 books x $70= $21,000)
	Feb 1, 2020	Sales Returns and Allowances	$          7,500
		Accounts Receivable		$          7,500
		(To record sales return for 50 books based on estimate 50 books x $150 = $7,500)
	Feb 1, 2020	Merchandise Inventory - Right of return	$          3,500
		Cost of Sales on Estimated Returns		$          3,500
		(To record inventory return for return estimates 50 books x $70 = $3,500)
at time of actual return	Jun 4, 2020	No Entry Required
		(since estimated return is already recorded at time of sale)
at time of return right expiry	Jul 18, 2020	Accounts Receivable	$          2,250
		Sales Returns and Allowances		$          2,250
		(To record adjustment for 15 books left unreturned 15 books x $150 = $2,250)
	Jul 18, 2020	Cost of Sales on Estimated Returns	$          1,050
		Merchandise Inventory - Right of return		$          1,050
		(To record adjsutment for 15 books inventory left unreturned 15 books x $70 = $1,050)