Question

QS 4-20C Recording estimated sales returns LO P6 ProBuilder reports merchandise sales of $50,000 and cost of merchandise sales of $20,000 in its first year of operations ending June 30, 2016. It makes fiscal year-end adjusting entries for estimated future returns and allowances equal to 2% of sales, or $1,000, and 2% of cost of sales, or $400 6. & b. Prepare the June 30, 2016, fiscal year-end adjusting journal entry for future returns and allowances related to sales and cost of sales. View transaction list Journal entry worksheet 1 2 > Record the expected sales to be refunded.

Answer 1

When the merchandise sales are returned, the adjusting entry will be

Sales returns and allowances Dr 1,000

To Accounts receivable / cash 1000

As merchandise sales are returned , there will a decrease in current assets -- If sale made for cash cash account is credited .Otherwise ,Accounts receivable avccount is credited

Then

Merchandise inventory Dr 400

To Cost of goods sold 400

As the goods are returned to inventory, so it is debited and the cost of goods that are returned is credited.