On October 2, 2020, Pronghorn Company sold $5,510 of its elite camping gear (with a cost of $3,470) to Lynch Outfitters. As part of the sales agreement, Pronghorn includes a provision that if Lynch is dissatisfied with the product, Pronghorn will grant an allowance on the sales price or agree to take the product back (although returns are rare, given the long-term relationship between Pronghorn and Lynch). Pronghorn expects total allowances to Lynch to be $770. On October 16, 2020, Pronghorn grants an allowance of $390 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog. Indicate the income statement and balance sheet reporting by Pronghorn at October 31, 2020, of the information related to theLynch transaction.Income Statement (partial)For the Quarter Ended October 31, 2020Sales revenue5510LessSales returns and allowancesNet SalesCost of goods soldGross profit$Balance Sheet (partial)October 31, 2020%24%24> Prepare journal entries for Pronghorn to record (1) the sale on October 2, 2020, (2) the granting of the allowance on October 16,2020, and, (3) any adjusting required on October 31, 2020 (when Pronghorn prepares financial statements). Pronghorn nowestimates additional allowances of $260 will be granted to Lynch in the future. (Credit account titles are automatically indented whenthe amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.)No Account Titles and ExplanationDebitCredit(1) Accounts Receivable5510Sales Revenue5510(To record sales on account)Cost of Goods Sold3470Inventory3470(To record cost of goods sold)(2)Sales Returns and Allowances390Accounts Receivable390(To record allowance)(3)Sales Returns and Allowances260Estimated Inventory Returns260(To record estimated remaining allowances)

Sales returns and allowances means value of goods that are being returned by customer or allowance…

Answered: Indicate the income statement and…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

On October 2, 2020, Pronghorn Company sold $5,510 of its elite camping gear (with a cost of $3,470) to Lynch Outfitters. As part of the sales agreement, Pronghorn includes a provision that if Lynch is dissatisfied with the product, Pronghorn will grant an allowance on the sales price or agree to take the product back (although returns are rare, given the long-term relationship between Pronghorn and Lynch). Pronghorn expects total allowances to Lynch to be $770. On October 16, 2020, Pronghorn grants an allowance of $390 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog.

Indicate the income statement and balance sheet reporting by Pronghorn at October 31, 2020, of the information related to the
Lynch transaction.
Income Statement (partial)
For the Quarter Ended October 31, 2020
Sales revenue
5510
Less
Sales returns and allowances
Net Sales
Cost of goods sold
Gross profit
$
Balance Sheet (partial)
October 31, 2020
%24
%24
>

Prepare journal entries for Pronghorn to record (1) the sale on October 2, 2020, (2) the granting of the allowance on October 16,
2020, and, (3) any adjusting required on October 31, 2020 (when Pronghorn prepares financial statements). Pronghorn now
estimates additional allowances of $260 will be granted to Lynch in the future. (Credit account titles are automatically indented when
the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.)
No Account Titles and Explanation
Debit
Credit
(1) Accounts Receivable
5510
Sales Revenue
5510
(To record sales on account)
Cost of Goods Sold
3470
Inventory
3470
(To record cost of goods sold)
(2)
Sales Returns and Allowances
390
Accounts Receivable
390
(To record allowance)
(3)
Sales Returns and Allowances
260
Estimated Inventory Returns
260
(To record estimated remaining allowances)

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions