Question

On October 2, 2020, Teal Company sold $5,510 of its elite camping gear (with a cost of $3,470) to Lynch Outfitters. As part of the sales agreement, Teal includes a provision that if Lynch is dissatisfied with the product, Teal will grant an allowance on the sales price or agree to take the product back (although returns are rare, given the long-term relationship between Teal and Lynch). Teal expects total allowances to Lynch to be $770. On October 16, 2020, Teal grants an allowance of $390 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog. (a) Prepare journal entries for Teal to record (1) the sale on October 2, 2020, (2) the granting of the allowance on October 16, 2020, and, (3) any adjusting required on October 31, 2020 (when Teal prepares financial statements). Teal now estimates additional allowances of $260 will be granted to Lynch in the future. (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 for the amounts.) Debit Credit No Account Titles and Explanation (1) (To record sales on account) (To record cost of goods sold) (2) (To record allowance) (3)

Answer 1

Answer
No	Account Titles and Explanation	Debit	Credit
1	Accounts Receivable	$     5,510
	Sales revenue		$     5,510
	(To record Sales revenue)
	Cost of Goods Sold	$     3,470
	Inventory		$     3,470
	(To record COGS)
2	Sales Return and Allowances	$     390
	Accounts Receivable		$     390
	(To record Sales Return and Allowances)
3	Sales Returns and Allowances	$     260
	Allowances for Sales Returns and Allowances		$     260
	(To record Sales Returns and Allowances)