Question

During 2018, its first year of operations, Hollis Industries recorded sales of $11,900,000 and experienced returns of $760,000. Cost goods sold totaled $7,140,000 (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, assuming that all sales are made on credit a all accounts receivable are outstanding. (If no entry is required for a transaction/event, select "No journal entry required" in the account field.) View transaction list Journal entry worksheet Record the anticipated sales returns. Note: Enter debits before credits. Event General Journal Debit Credit

Answer 1

Solution:

Event	General Journal	Debit	Credit
1	Sales Returns and allowances ($11,900,000*8% - $760,000)	192000
	Refund Liability		192000
	(To record anticipated sales returns)
2	Inventory ($192000*60%)	115200
	Cost of goods sold		115200
	(To record cost of goods sold on sales return anticipated)