Question

Crane Publishing Co. publishes college textbooks that are sold to bookstores on the following terms. Each title has a fixed wholesale price, terms f.o.b. shipping point, and payment is due 60 days after shipment. The retailer may return a maximum of 30% of an order at the retailer’s expense. Sales are made only to retailers who have good credit ratings. Past experience indicates that the normal return rate is 12% and the average collection period is 72 days. The company follows IFRS.

(A) On August 8, 2020, Crane shipped books invoiced at $38,000,000 (cost $30,000,000). Prepare the journal entry to record this transaction, including the expected returns. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(B)  On October 3, 2020, $1,400,000 million of the invoiced July sales were returned according to the return policy, and the remaining $36,600,000 million was paid. Prepare the journal entries for the return and payment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal palces, e.g. 5,275.)

Answer 1

Credit Date August 8, 2020 Account title and explanation Account receivable Sales Debit 38,000,000 $ 38,000,000 August 8, 2020 s 30.000.000 cost of goods sold Inventory $ 30,000,000 Date Credit Account title and explanation Sales return and allowance Account receivable Debit 1,400,000 October 3, 2020, $ 1.400,000 October 3, 2020. 1,105,263 Inventory Cost of goods sold (30,000,000 / 38,000,000) x 1,400,0000 S 1,105,263 October 3, 2020, $ 36,600,000 Cash Account receivable S 36,600,000 Please comment if you have any doubt Please give feedback