Question

In: Accounting

When merchandise returns are anticipated, an allowance for sales returns should be recorded as a contra...

Knowledge Check 01
At the end of its first year of operations, Loring Industries estimates that sales returns in the amount of $20,000 will occur during Year 2. The cost of the inventory expected to be returned is $12,000. All of Loring’s sales are made for cash and the company uses a perpetual inventory system. Assume that no returns have occurred as of the end of Year 1. Prepare the appropriate adjusting journal entry to record the expected sales returns and the inventory expected to be returned in Year 2.

Journal entry worksheet 2 Record the $20,000 estimate of expected returns from customers Note: Enter debits before credits. Event General Journal Debit Credit 01 Record entry Clear entry View general journal

Journal entry worksheet 2 Record the $20,000 estimate of expected returns from customers Note: Enter debits before credits. Event General Journal Debit Credit 01 Record entry Clear entry View general journal

When merchandise returns are anticipated, an allowance for sales returns should be recorded as a contra account to accounts receivable and sales revenue also should be reduced by the anticipated sales returns.




Solutions

Expert Solution

1. journal entry to record the expected sales returns
Debit Credit
Sales Return 20000
Refund Liabities 20000
(Expected Return)
2. the inventory expected to be returned in Year 2.
Inventory-Sales Return 12000
Cost of goods sold 12000
(COGS of expected return of goods)

Related Solutions

Sales Returns Which of the following statements is true relating to the allowance for sales returns?...
Sales Returns Which of the following statements is true relating to the allowance for sales returns? a. Sales returns is treated as an expense in the income statement and, therefore, reduces profit for the period. b. An excess of the amount by which the allowance for sales returns is increased compared with the actual returns for the period indicates the company may have inflated profit for the period. c. The amount by which the allowance for sales returns is reduced...
        0.... The account in which returns of merchandise sold are recorded ...........         1.... The...
        0.... The account in which returns of merchandise sold are recorded ...........         1.... The principal ledger that contains all of the balance sheet and income statement accounts is called the ............................................................         2.... Each subsidiary ledger is represented by a summarizing account in the general ledger called a(n) .................................................................         3.... The accounts in the accounts payable ledger have a normal balance of (debit or credit) .......................................................................................         4.... The bill that the seller sends to the buyer...
Griffin Shoe Company records Sales Returns and Allowances, Sales Discounts, and Credit Card Discounts as contra-revenues....
Griffin Shoe Company records Sales Returns and Allowances, Sales Discounts, and Credit Card Discounts as contra-revenues. July 12 Sold merchandise to customer at factory store who charged the $300 purchase on her American Express card. American Express charges a 2 percent credit card fee. Cost of goods sold was $175. July 15 Sold merchandise to Customer T at an invoice price of $5,400; terms 1/10, n/30. Cost of goods sold was $2,700. July 20 Collected cash due from Customer T....
TRUE OR FALSE? Allowance for Doubtful Accounts is a contra asset account.
TRUE OR FALSE?Allowance for Doubtful Accounts is a contra asset account.A factor purchases receivables from businesses for a fee and collects the directly from customers.A note is dishonored when it is not fully paid at maturity.All plant assets (fixed assets) must be depreciated for accounting purposesRecording depreciation on plant assets affects the balance sheet and the income statement.Current liabilities are typically expected to be paid within one year.A note payable must always be paid before an account payable.A debenture bond...
A contra asset represents A. an account such as Allowance for Doubtful Accounts which reflects a...
A contra asset represents A. an account such as Allowance for Doubtful Accounts which reflects a decline in the net      realizable value of accounts receivable. B. an account that is presented as a credit balance in the asset section of the balance sheet. C. an account such as Accumulated Depreciation. D. all of the above. Under the allowance method of accounting for uncollectible accounts receivable, an actual write-off is recorded as A.  a debit to Allowance for Doubtful Accounts and a...
MERCHANDISE INVENTORY ADJUSTMENTS: PERIODIC INVENTORY SYSTEM WITH SALES RETURNS AND ALLOWANCES
MERCHANDISE INVENTORY ADJUSTMENTS: PERIODIC INVENTORY SYSTEM WITH SALES RETURNS AND ALLOWANCES Use the information provided below to prepare a partial end-of-period spreadsheet for Karen’s Gift Shop for the year ended December 31, 20--. The ending merchandise inventory is $60,000. Karen estimates that customers will be granted $15,000 in refunds next year for merchandise sold this year. The estimated cost of the returned inventory is $10,000. 1. Complete the Adjustments columns for merchandise Inventory and related accounts. 2. Extend all accounts...
1)The allowance for doubtful accounts is reported as a contra-asset on the balance sheet Select one:...
1)The allowance for doubtful accounts is reported as a contra-asset on the balance sheet Select one: True False 2)When goods are shipped FOB destination, the revenue from the sale is recognized on the shipment date. Select one: True False 3)Tangible long-lived productive assets differ from intangible long-lived productive assets in that tangible assets have physical substance whereas intangible assets have no physical substance. Select one: True False 4)Treasury stock is a corporation's own stock that was issued and then repurchased,...
1. When a customer returns merchandise purchased on credit, the A. None of these answer choices...
1. When a customer returns merchandise purchased on credit, the A. None of these answer choices are correct B. Seller should credit sales returns and allowances C. Customer should credit accounts payable D. Seller should credit accounts receivable 2. With regard to accounting for a merchandising company versus a service company, which of the following is FALSE. A. There are just as many steps in the accounting cycle for both types of companies B. Merchandising companies do not have inventory...
(Sales with Returns) On June 3, 2020, Hunt Company sold to Ann Mount merchandise having a...
(Sales with Returns) On June 3, 2020, Hunt Company sold to Ann Mount merchandise having a sales price of $8,000 (cost $6,000) with terms of n/60, f.o.b. shipping point. Hunt estimates that merchandise with a sales value of $800 will be returned. An invoice totaling $120 was received by Mount on June 8 from Olympic Transport Service for the freight cost. Upon receipt of the goods, on June 8, Mount returned to Hunt $300 of merchandise containing flaws. Hunt estimates...
Which of the following costs should not be recorded as an expense? Multiple Choice Sales commissions...
Which of the following costs should not be recorded as an expense? Multiple Choice Sales commissions Insurance on factory building Product shipping costs Product advertising
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT