Question

Martinez Publishing Co. publishes college textbooks that are sold to bookstores on the following terms. Each title has a fixed wholesale price, terms f.o.b. shipping point, and payment is due 60 days after shipment. The retailer may return a maximum of 30% of an order at the retailer’s expense. Sales are made only to retailers who have good credit ratings. Past experience indicates that the normal return rate is 12%. The costs of recovery are expected to be immaterial, and the textbooks are expected to be resold at a profit. On July 1, 2017, Martinez shipped books invoiced at $13,800,000 (cost $11,040,000). Prepare the journal entry to record this transaction. (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.) Account Titles and Explanation Debit Credit (To recognize revenue.) (To record cost of goods sold.) On October 3, 2017, $1,380,000 of the invoiced July sales were returned according to the return policy, and the remaining $12,420,000 was paid. Prepare the journal entries for the return and payment. (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.) Date Account Titles and Explanation Debit Credit Oct. 3, 2017 (To record the return) (To record cost of goods returned) (To record the payment) Assume Martinez prepares financial statements on October 31, 2017, the close of the fiscal year. No other returns are anticipated. Indicate the amounts reported on the income statement and balance related to the above transactions. (If answer is 0, please enter 0. Do not leave any fields blank.) Income Statement (partial) $ : $ Balance Sheet (partial) $

Answer 1