Question

Emerson St Book Shop's uradjusted Merchandise inventory June 30, 2018 was $5.200. The colocated with the physical count of inventory on hand on June 30, 2018, was 4.500. In addition, Emerson Sl. Book Shops approximately $1,000 of merchandise sold will be returned with a cost of $400 Requirements 1. Joumal the adjustment for inventory shrinkage 2 Joumalize the adjustment for estimated sales returns Requirement 1. Joumaize the adjustment for inventory stage Record debts fast, the credits Exclude explanations from ouma ties) Date Accounts Requirement 2. Joumaczone aument for estimated sales returns. Recorde r , then credits Exclude explorations from Journal First journals the estimated refunds. We will record the impact to invertory in the following step Debit Now jutralize the cost of the estimated returns Date Accounts Doba Creda Choose from any lator enterary number in the rout folds and then continue to the next Question

Answer 1

1) Journal entry for adjustment for inventory shrinkage: Date Jun. 30 Account Titles and Explanation Cost of Goods Sold Merchandise Inventory Debit $300 Credit [$5,200 - $4,900] $300 When physical inventory is less than book inventory, adjusting entry must decrease book value of merchandise inventory balance and so Merchandise Inventory account is credited. As it relates to firm's sales activities, Cost of Goods Sold account is debited.

2) Journal entry for adjustment for estimated sales returns: Credit Date Jun. 30 Account Titles and Explanation Sales Returns and Allowances Refund Liability Debit $1,000 $1,000 Above entry is made to record estimated sales returns at sale value. Sales returns and allowances is an expense but to be reduced from actual sales for the period to arrive at net sale revenue. As there is an estimated refund, a liability named 'Refund Liability' is created by crediting the same. Date Jun. 30 Account Titles and Explanation Estimated Returns Inventory Cost of Goods Sold Debit $400 Credit ($5,200 - $4,900] $400 When physical inventory is estimated to be returned by customers, book inventory balance will increase and so Estimated Returns Inventory account is debited. As it relates to firm's sales activities, Cost of Goods Sold account is credited.