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Customer allowances and returns Assume the following data for Casper Company before its year-end adjustments:  ...

Customer allowances and returns

Assume the following data for Casper Company before its year-end adjustments:

  Unadjusted Balances
  Debit Credit
Sales   $1,750,000
Cost of Merchandise Sold $1,000,000  
Estimated Returns Inventory 600  
Customer Refunds Payable   400
Estimated cost of merchandise that will be returned in the next year $8,000  
Estimated percent of refunds for current year sales 0.6%  

a. Journalize the adjusting entry for the estimated customer allowances.

  Sales    
  Customer Refunds Payable    

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b. Journalize the adjusting entry for the estimated customer returns.

  Estimated Returns Inventory    
  Cost of Merchandise Sold    
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Answer #1
Transaction Account Titles and Explanation Debit Credit
a. Sales $       10,500
Customer refund payable $       10,500
($1750000 X 0.6%)
b. Estimated returns inventory $         8,000
Cost of merchandise sold $         8,000
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