During the year, Raul Company sells merchandise on account totaling $2,000,000 (the cost to Raul for this merchandise was $800,000). Raul allows a 60-day return privilege for the merchandise it sells. At year-end, Raul estimates there remain $400,000 of sales (with a cost to Raul of $160,000) that are still within the 60-day return period. Based on past experience, Raul expects 5 percent of this merchandise to be returned.
During the year, Raul Company sells merchandise on account totaling $2,000,000 (the cost to Raul for this merchandise was $800,000). Raul allows a 60-day return privilege for the merchandise it sells. At year-end, Raul estimates there remain $400,000 of sales (with a cost to Raul of $160,000) that are still within the 60-day return period. Based on past experience, Raul expects 5 percent of this merchandise to be returned.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
New Revenue Recognition Standard—
During the year, Raul Company sells merchandise on account totaling $2,000,000 (the cost to Raul for this merchandise was $800,000). Raul allows a 60-day return privilege for the merchandise it sells. At year-end, Raul estimates there remain $400,000 of sales (with a cost to Raul of $160,000) that are still within the 60-day return period. Based on past experience, Raul expects 5 percent of this merchandise to be returned.
Prepare the period-end adjusting journal entries needed for Raul Company to comply with the new revenue recognition standard. Raul’s fiscal year-end is December 31.
| General Journal | ||
|---|---|---|
| Description | Debit | Credit |
| Answer | Answer | Answer |
| Answer | Answer | Answer |
| To record estimated return of sales still eligible for return. | ||
| Answer | Answer | Answer |
| Answer | Answer | Answer |
| To record the cost of merchandise sold for sales still eligible for return. |
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