Question

1/ False Value Hardware began 2018 with a credit balance of $31,500 in the allowance for sales returns account. Sales and cash collections from customers during the year were $600,000 and $560,000, respectively. False Value estimates that 7% of all sales will be returned. During 2018, customers returned merchandise for credit of $21,000 to their accounts.

What is the balance in the allowance for sales returns account at the end of 2018?

Multiple Choice

• $52,500.

• $42,000.

• $10,500.

• $63,000.

2/ Oswego Clay Pipe Company sold $46,300 of pipe to Southeast Water District #45 on April 12 of the current year with terms 3/15, n/60. Oswego uses the gross method of accounting for cash discounts.

What entry would Oswego make on April 23, assuming the customer made the correct payment on that date?

Multiple Choice

• Cash	46,300
  Accounts receivable		44,911
  Sales		1,389

• Cash	46,300
  Sales discounts	1,389
  Accounts receivable		46,300
  Sales discounts forfeited		1,389

• Cash	44,911
  Sales	1,389
  Accounts receivable		46,300

• Cash	44,911
  Sales discounts	1,389
  Accounts receivable		46,300

Answer 1

1. Balance in Allowance for sales returns accounts

=Beginning balance + returns - returns for credits

=31,500 + (600,000 * 7%) - 21,000

=52,500

Option A is the answer

​​​​​​.... ... .. . . .... . ..

2. The entry would be

Cash	44911
Sales discount	1389
Accounts Receivable		46,300

Option D is the answer