Adjusting entry for customer refunds, allowances, and returnsStatz Company had sales of $1,800,000 and related cost of goods sold of$1,150,000 for its first year of operations ending December 31, 20Y1.Statz provides customers a refund for any returned or damaged merchandise. At the end of 20Y1, Statz Company estimates thatcustomers will request refunds for 1.5% of sales and estimates thatmerchandise costing $16,000 will be returned. Assume that on February3, 20Y2, Buck Co. returned merchandise with an invoice amount of $5,000 for a cash refund. The returned merchandise originally cost StatzCompany $3,100. (a) Journalize the adjusting entries on December 31,20Y1, to record the expected customer returns. (b) Journalize the entriesto record the returned merchandise and cash refund to Buck Co. onFebruary 3, 20Y2.
Adjusting entry for customer refunds, allowances, and returns
Statz Company had sales of $1,800,000 and related cost of goods sold of
$1,150,000 for its first year of operations ending December 31, 20Y1.
Statz provides customers a refund for any returned or damaged merchandise. At the end of 20Y1, Statz Company estimates that
customers will request refunds for 1.5% of sales and estimates that
merchandise costing $16,000 will be returned. Assume that on February
3, 20Y2, Buck Co. returned merchandise with an invoice amount of $5,000 for a cash refund. The returned merchandise originally cost Statz
Company $3,100. (a) Journalize the
20Y1, to record the expected customer returns. (b) Journalize the entries
to record the returned merchandise and cash refund to Buck Co. on
February 3, 20Y2.
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