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Max Corporation sells 100 jars of essential oil to Bed, Bath, and Relax on December 1,...

Max Corporation sells 100 jars of essential oil to Bed, Bath, and Relax on December 1, 20X5, for $10 each on account. Max offers a right to return the product for any reason. Based on past sales, Max expects Bed, Bath, and Relax to return 5 jars. What adjusting journal entry, if any, should Max record on December 31, 20X5, to reflect Bed, Bath, and Relax's expected sales returns?

Dr Sales Returns and Allowances Cr Allowance for Sales Returns and Allowances $50

No entry required because Bed, Bath, and Relax has not returned any jars.

Dr Sales Revenue Cr Accounts Receivable $50

Dr Sales Returns and Allowances Cr Accounts Receivable $50

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Answer #1
Date Accounts Debit Credit
December 31, 20X5 Sales Returns and Allowances ($10*5) $50
Allowance for Sales Returns and Allowances $50

Option a. is correct answer.

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