Question

Regarding Sales Discount & Sales Returns & Allowances: Which of the following is true?

Question 1 options:

	For the potential sales returns occurring in the near future, we created the account "Refunds Payable" to capture the estimated amount of cost of inventory that will be returned in the near future.
	When the actual return happens, we Debit "Refunds Payable" to decrease it in one journal entry, and in another journal entry we Credit "Estimated Returns Inventory" to increase it.
	If a customer comes back within the discount period to pay for a sale we did to them few days ago, we need to record a journal entry that has "Sales Discounts Forfeited" account in it.
	We capture the sales discount upfront in the journal entry we recorded the day we made the sale, and we captured the estimated sales returns at the end of the year.

In the Perpetual Inventory system, the Merchandise Inventory account is used in which journal entries?

Question 2 options:

	When we buy the inventory, get a discount on the inventory from vendor, return the inventory to vendor, and ship the inventory to us FOB Destination.
	When we buy the inventory, get a discount on the inventory from vendor, return the inventory to vendor, and ship the inventory to us FOB Shipping point.
	When we buy the inventory, give a discount on the inventory to our customer, return the inventory to vendor, and ship the inventory to us FOB Shipping point.
	When we buy the inventory, get a discount on the inventory from vendor, return of inventory from our customer, and ship the inventory to us FOB Destination.

Answer 1

Q1.

a. True - Provision for sales refund can be created on a estimate basis on past data basis.

b. False - The estimated returns inventory account is not used.

c. True - Yes the Sales Discount Forfeited would be credited.

d. True - The statement is correct.

Q3. Answer is a.

When we buy the inventory, get a discount on the inventory from vendor, return the inventory to vendor, and ship the inventory to us FOB Destination.

These are the correct option.