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Accounting
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Nov 24, 2024
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Under the ASPE (Accounting Standards for Private Enterprises), let's
prepare the journal entries for Amodt Ltd. to record the sale on July
10, 2023, considering expected returns, and the actual returns on
October 11, 2023, based on the information provided:
(a) Journal entry to record the sale on July 10,
2023, including expected returns:
1.
Recording the sale of GPS systems to retailers,
accounting for expected returns:
Journal Entry on July 10, 2023:
bashCopy code
Accounts Receivable
$700
,000 Sales Revenue
$700
,000 Estimated Returns Liability
$105
,000 Cost of Goods Sold
$560
,000 Inventory
$560
,000
Explanation:
Debit Accounts Receivable for the selling price of GPS
systems ($700,000).
Credit Sales Revenue for the gross sales amount
($700,000).
Credit Estimated Returns Liability for the estimated
returns (15% of $700,000 = $105,000). This establishes a
liability for the expected returns.
Debit Cost of Goods Sold for the cost of goods sold
($560,000).
Credit Inventory to reduce the inventory value by the cost
of goods sold.
(b) Journal entry to record the $78,000 of actual
returns on October 11, 2023:
2.
Recording the actual returns received from retailers:
Journal Entry on October 11, 2023:
bashCopy code
Estimated Returns Liability
$105
,000 Accounts Receivable
$78
,000 Cost of Goods
Sold
$62
,400 Inventory
$62
,400
Explanation:
Debit Estimated Returns Liability to reduce the estimated
liability for returns ($105,000 - $78,000 = $27,000
remaining).
Credit Accounts Receivable to reduce the amount owed
by retailers due to the returns.
Debit Cost of Goods Sold for the cost of the returned
goods ($560,000 * 15% = $84,000, considering the cost
of returned goods at the same rate as the expected
returns).
Credit Inventory to increase the inventory value due to
the return of goods back into inventory.
These journal entries align with the ASPE standards and account for
the initial sale, the establishment of an estimated returns liability for
expected returns, and the subsequent adjustment for actual returns
received from retailers.
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