Question

During 2021, its first year of operations, Hollis Industries recorded sales of $11,600,000 and experienced returns of $640,000. Cost of goods sold totaled $6,960,000 (60% of sales). The company estimates that 7% 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 and all accounts receivable are outstanding. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet < 1 2 Record the anticipated sales returns.

Answer 1

Credit Debit $ 172,000 1 Account Titles and Explanation Sales returns [($11,600,000*7%) - $640,000) Refund liability (To record the anticipated sales returns) $ 172,000 $ 103,200 Inventory - estimated returns ($172,000*60%) Costr of goods sold (To record estimated return of inventory) $ 103,200