Question

Customer allowances and returns

Assume the following data for Casper Company before its year-end adjustments:

	Unadjusted Balances
	Debit	Credit
Sales		$1,750,000
Cost of Merchandise Sold	$1,000,000
Estimated Returns Inventory	600
Customer Refunds Payable		400
Estimated cost of merchandise that will be returned in the next year	$8,000
Estimated percent of refunds for current year sales	0.6%

a. Journalize the adjusting entry for the estimated customer allowances.

	Sales
	Customer Refunds Payable

Feedback

b. Journalize the adjusting entry for the estimated customer returns.

	Estimated Returns Inventory
	Cost of Merchandise Sold

Answer 1

Transaction	Account Titles and Explanation	Debit	Credit
a.	Sales	$       10,500
	Customer refund payable		$       10,500
	($1750000 X 0.6%)
b.	Estimated returns inventory	$         8,000
	Cost of merchandise sold		$         8,000