Question

On July 2, 2021, Blossom Company sold to Sue Black merchandise having a sales price of $9,600 (cost $5,760) with terms of 2/10. n/30. f.o.b. shipping point. Blossom estimates that merchandise with a sales value of $810 will be returned. An invoice totaling $100, terms n/30, was received by Black on July 6 from Pacific Delivery Service for the freight cost. Upon receipt of the goods, on July 3, Black notified Blossom that $350 of merchandise contained flaws. The same day, Blossom issued a credit memo covering the defective merchandise and asked that it be returned at Blossom’s expense. Blossom estimates the returned items to have a fair value of $120. The freight on the returned merchandise was $20 paid by Blossom on July 7. On July 12, the company received a check for the balance due from Black.

Prepare journal entries for Blossom Company to record all the events noted above assuming sales and receivables are entered at gross selling price.

Answer 1

Date	Account title and description	Debit $	Credit $
02-Jul	Accounts Receivable	9600
	Allowance for Sales Returns		810
	Sales Revenue (9600-810)		8790
	(To record sales and sales return at sale price)
02-Jul	Estimated Inventory Returns (=5760/9600*810)	486
	Cost of Goods Sold (5760-486)	4483
	Inventory		5760
	(To record sales return at cost price)
03-Jul	Allowance for Sales Returns .	350
	Accounts Receivable		350
	(To record cost of merchandise which contained flaws)
03-Jul	Returned Inventory	120
	Estimated Inventory Returns		120
	(To record sales return at fair value)
07-Jul	Delivery Expense	20
	Cash		20
	(To record the delivery Expense)
12-Jul	Cash	9065
	Sales Discounts (9250*2%)	185
	Accounts Receivable (9600-350)		9250
	(To record the recipt )