Question

1 Brief Exercise 7-6 (Algo) Sales returns (L07-4] During 2021, its first year of operations, Hollis Industries recorded sales of $10,600,000 and experienced returns of $860,000. Cost of goods sold totaled $7.950,000 (75% of sales). The company estimates that 10% of all sales will be returned. Prepare the year-end adjusting journal entries to account for anticipated sales returns under the assumption that all sales are made for cash (no accounts receivable are outstanding). (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction list Journal entry worksheet < 0 21 Record estimated return of inventory.

Answer 1

Solution To prepare the Journal entrees, Remarning Estimated Sales Returns = Estimated Returns - Actual Returns = 10600000 X10% - 860000 = 200000

Accounts titles Debit Gredit 200000 sales retorn Allowance for sales Return 200000 No 2) The adjusting entry to record estimated return of Inventory would Involve a debit to Inventory estimated returns and a credet to cost of good sold with (200000 x 75%) 150000 , Account titles Debit Gredet 150000 Inventory estimated Returns cost of goods sold 150000