During 2021, its first year of operations, Hollis Industries recorded sales of $10,600,000 and experienced returns of $720,000. Cost of goods sold totaled $6,360,000 (60% of sales). The company estimates that 8% 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).
| Date | Accounts | Debit | Credit |
| December 31, 2021 | sales revenue (1060000*8%-720000) | 128000 | |
| Allowance for sales return | 128000 | ||
Sales returns:
= ($10,600,000 X 8%) - $720,000
= $128,000
Inventory returns:
= $128,000 X 60%
= $76,800
| General Journal | Debit | Credit |
| Sales returns | $128,000 | - |
| Allowance for sales returns | - | $128,000 |
| Inventory - Sales returns | $76,800 | - |
| Cost of goods sold | - | $76,800 |
During 2021, its first year of operations, Hollis Industries recorded sales of $10,600,000 and experienced returns...