Question

Cullumber Company sells 430 units of its products for $15 each to Marin Inc. for cash. Cullumber allows Marin to return any unused product within 30 days and receive a full refund. The cost of each product is $10. To determine the transaction price, Cullumber decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the probability-weighted amount. Using the probability-weighted amount, Cullumber estimates that (1) 12 products will be returned, and (2) the returned products are expected to be resold at a profit. Prepare the journal entries for Cullumber at the time of the sale to Marin including any expected returns. The company follows IFRS. (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 "o" for the amounts.) Account Titles and Explanation Debit Credit (To record cash sale) (To record cost of goods sold)

Answer 1

Journal Entries:

Account Titles and Explanations	Debit	Credit
Cash (430 units * $15 each)	$6,450
Sales Revenue (430 units - 12 units = 418 units * $15 each)		$6,270
Expected Returns (12 units * $15 each)		$180
(To record the cash sales along with estimated returns)
Cost of Goods Sold (418 units * $10 each)	$4,180
Cost of Expected Returns (12 units * $10 each)	$120
Inventory (430 units * $10 each)		$4,300
(To record the cost of goods sold)