Question

To promote the sale of some specialty goods, Marin Ltd. began a generous return policy to its customers. Customers can return merchandise for up to three months following the date of the invoice, no questions asked. For the current period, sales of these specialty goods totalled $40,600. Marin chooses to estimate any expected sales returns at the end of each reporting period, rather than recording the Refund Liability at the point of sale. At the end of the reporting period, Marin estimates that outstanding returns will be $3,210. Assuming Marin follows ASPE and records expected outstanding returns to Allowance for Sales Returns and Allowances. Prepare the required adjusting journal entry at the end of the reporting period. (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
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Answer 1

Following entry will be made for expected outstanding returns using Allowance for Sales Returns and Allowances:

Journal

	Sales Returns and Allowances	$3,210
	Allowance for Sales Returns and Allowances		$3,210

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