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$ millions Gross sales Allowance for sales returns Net sales 2017 2018 2019 $20,141 $22,355 $26,701 1,411 1,568 1,589 $18,730 $20,787 $25,112 Required

$ millions Gross sales Allowance for sales returns Net sales 2017 2018 2019 $20,141 $22,355 $26,701 1,411 1,568 1,589 $18,730 $20,787 $25,112 Required

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sales Allowances Fitz-Chivalry Corporation reports the following information on its 2019 income statement. $ millions Gross sales 2017 2018 $20,141 $22,355 $26,701 2019 Allowance for sales returns 1,411 1,568 1,589 Net sales $18,730 $20,787 $25,112 Required Analysis of financial statements from prior years shows that the company consistently estimates the allowance for sales returns at about 7% of gross sales. What adjustment, if any, would we make to the 2019 income statement? Assume the company's combined federal and state tax rate is 24%. Hint: For adjustments to the income statement, we assume the normal 7% for the ratio of Allowance for sales returns to Gross sales for each year. Determine the 2019 adjusted allowance for sales return. (Round answer to nearest whole number.) $ millions Adjusted (total) allowance for sales returns $ 2019 Using the adjusted (total) allowance for sales returns computed above, determine the 2019 adjustments for the following income statement items. Notes: • Round answers to nearest whole number. • Use negative signs with answers to indicate the adjustment decreases an account. Adjustments to Income Statement, $ millions 2019 Allowance for sales returns $ $ Net sales Income tax expense Net Income $ $
Transcribed Image Text:Sales Allowances Fitz-Chivalry Corporation reports the following information on its 2019 income statement. $ millions Gross sales 2017 2018 $20,141 $22,355 $26,701 2019 Allowance for sales returns 1,411 1,568 1,589 Net sales $18,730 $20,787 $25,112 Required Analysis of financial statements from prior years shows that the company consistently estimates the allowance for sales returns at about 7% of gross sales. What adjustment, if any, would we make to the 2019 income statement? Assume the company's combined federal and state tax rate is 24%. Hint: For adjustments to the income statement, we assume the normal 7% for the ratio of Allowance for sales returns to Gross sales for each year. Determine the 2019 adjusted allowance for sales return. (Round answer to nearest whole number.) $ millions Adjusted (total) allowance for sales returns $ 2019 Using the adjusted (total) allowance for sales returns computed above, determine the 2019 adjustments for the following income statement items. Notes: • Round answers to nearest whole number. • Use negative signs with answers to indicate the adjustment decreases an account. Adjustments to Income Statement, $ millions 2019 Allowance for sales returns $ $ Net sales Income tax expense Net Income $ $
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