Chico Company allows its customers to return merchandise within 30 days of purchase. *At December 31, the end of its first year of operations, Chico estimates  future-period merchandise returns of $60000 (cost of $22500) related to it's current year sales. *A few days later, on January 3, a customer  returns merchandise  with a selling price of $2000 for a cash refund; the returned merchandise  cost $750 and is returned to inventory as it is not defective. a.Prepare the December 31 year -end adjusting journal entry for estimated future sales returns and allowances (revenue side). b.Prepare the December 31 year-end adjusting journal entry for estimated  future inventory returns and allowances (cost side). c.Prepare the January 3 journal entries to record the merchandise  returned.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Chico Company allows its customers to return merchandise within 30 days of purchase.

*At December 31, the end of its first year of operations, Chico estimates  future-period merchandise returns of $60000 (cost of $22500) related to it's current year sales.

*A few days later, on January 3, a customer  returns merchandise  with a selling price of $2000 for a cash refund; the returned merchandise  cost $750 and is returned to inventory as it is not defective.

a.Prepare the December 31 year -end adjusting journal entry for estimated future sales returns and allowances (revenue side).

b.Prepare the December 31 year-end adjusting journal entry for estimated  future inventory returns and allowances (cost side).

c.Prepare the January 3 journal entries to record the merchandise  returned.

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