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Tianjin Growth Company is presently testing a number of new ag recently harvested. To stimulate interest it has decided to gr
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Answer #1
Journal Entries - Right of Return
Date Particulars Debit Credit
A)
3-Jan-20 Accounts Receivable 1500000
     Sales 1200000
     Refund Liability 300000
(To record the sale of seed on account to customers and to record the possible return)
3-Jan-20 Cost of Goods Sold 640000
Refund Asset 160000
     Inventory 800000
(To record the cost of goods sold and making a provision for right to return)
B)
1-Feb-20 Refund Liability 100000
Accounts Receivable 100000
( To record the return of seeds)
Inventory 53333
Refund Asset 53333
(To record the cost of goods returned (800000*100000)/1500000)

C. If Tianjin Growth is unable to reliably estimate returns, then it should avoid recording the revenue till the loss can be ascertained or till the return period expires.

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