Big 5 Sporting Goods, a sporting goods retailer headquartered in El Segundo, California with 434 stores in Arizona, California, Colorado, Idaho, Nevada, New Mexico, and Wyoming. Big 5 Sporting Goods allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Big 5 Sporting Goods's sales are for credit (no cash is collected at the time of sale). Big 5 Sporting Goods began the current year with a refund liability of $380,000. During the current year, Big 5 Sporting Goods sold merchandise on account for $12,300,000. Big 5 Sporting Goods' merchandise costs are 70% of merchandise selling price. Also during the year, customers returned $603,000 in sales for credit, with $333,000 of those being returns of merchandise sold prior to the current year, and the rest being merchandise sold during the current year. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year
Big 5 Sporting Goods, a sporting goods retailer headquartered in El Segundo, California with 434 stores in Arizona, California, Colorado, Idaho, Nevada, New Mexico, and Wyoming. Big 5 Sporting Goods allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Big 5 Sporting Goods's sales are for credit (no cash is collected at the time of sale). Big 5 Sporting Goods began the current year with a refund liability of $380,000. During the current year, Big 5 Sporting Goods sold merchandise on account for $12,300,000. Big 5 Sporting Goods' merchandise costs are 70% of merchandise selling price. Also during the year, customers returned $603,000 in sales for credit, with $333,000 of those being returns of merchandise sold prior to the current year, and the rest being merchandise sold during the current year. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Big 5 Sporting Goods, a sporting goods retailer headquartered in El Segundo, California with 434 stores in Arizona, California,
Colorado, Idaho, Nevada, New Mexico, and Wyoming. Big 5 Sporting Goods allows its customers to return merchandise for any reason
up to 90 days after delivery and receive a credit to their accounts. All of Big 5 Sporting Goods's sales are for credit (no cash is
collected at the time of sale). Big 5 Sporting Goods began the current year with a refund liability of $380,000. During the current year,
Big 5 Sporting Goods sold merchandise on account for $12,300,000. Big 5 Sporting Goods' merchandise costs are 70% of
merchandise selling price. Also during the year, customers returned $603,000 in sales for credit, with $333,000 of those being returns
of merchandise sold prior to the current year, and the rest being merchandise sold during the current year. Sales returns, estimated to
be 5% of sales, are recorded as an adjusting entry at the end of the year.
Required:
1. For Big 5 Sporting Goods: please prepare entries to (a) record actual returns in the current year of merchandise that was
sold prior to the current year; (b) record actual returns in the current year of merchandise that was sold during the current year;
and (c) adjust the refund liability to its appropriate balance at year end.
2. What is the amount of the year-end refund liability after the adjusting entry is recorded?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
What is the amount of the year-end refund liability after the adjusting entry is recorded?
Ending balance in refund liability
< Required 1
Required 2
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