Question

Brief Exercise 7-7 (Algo) Sales returns (L07-4) During 2021, its first year of operations, Hollis Industries recorded sales of $11,700,000 and experienced returns of $830,000. Cost of goods sold totaled $8,775,000 (75% 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, assuming that all sales are made on credit and all 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

Answer 1

Event	General Journal				Debit	Credit
1	Sales return				106,000
	Refund liability					106,000
2	inventory estimated returns				79500
	cost of goods sold					79,500
	Explanation
	Estimated returns		11,700,000*8%=			936000
	less:Actual returns					-830,000
	Remaining estimated returns					106000
	cost of goods sold 106,000*75%=					79500