Question

In: Statistics and Probability

False Value Hardware began 2018 with a credit balance of $31,800 in the allowance for sales...

False Value Hardware began 2018 with a credit balance of $31,800 in the allowance for sales returns account. Sales and cash collections from customers during the year were $730,000 and $690,000, respectively. False Value estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $21,000 to their accounts.

False Value Hardwares 2018 income statement would report net sales of :

A) 709,000

B) 686,200

C) 719,200

D) 698,200

Expert Solution

SOLUTION:

From given data,

False Value Hardware began 2018 with a credit balance of $31,800 in the allowance for sales returns account. Sales and cash collections from customers during the year were $730,000 and $690,000, respectively. False Value estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $21,000 to their accounts.

Where ,

False Value estimates = 6% = 6/100 = 0.06

Sales = $730,000

Estimate sales return = $730,000 *0.06

= $43,800.

False Value Hardwares 2018 income statement would report net sales of :

Net sales reported = Sales - Estimate sales return

= $730000 - $43800.

= $ 686,200

Answer : option(B)

orchestra answered 2 years ago

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