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On April 2, 2021, Cullumber Company entered into a contract to supply medication to Laxall Drug Stores, FOB shipping point, terms 2/30, n/45. The selling price of the medication is $50,000 and the medication cost Cullumber Company $20,000. Cullumber has a stated return policy that goods may be returned within 30 days. The medication was shipped on April 10, 2021. Cullumber's management estimates returns using the expected value method and sales discounts are estimated using the most likely outcome. Based on past experience with this product, returns are 5% of sales 50% of the time, 10% of sales 20% of the time, and 20% of sales 30% of the time. Laxall Drug Stores will most likely pay within the discount period. Cullumber Company uses the contract-based approach for revenue recognition.

On April 2, 2021, Cullumber Company entered into a contract to supply medication to Laxall Drug Stores, FOB shipping point, terms 2/30, n/45. The selling price of the medication is $50,000 and the medication cost Cullumber Company $20,000. Cullumber has a stated return policy that goods may be returned within 30 days. The medication was shipped on April 10, 2021. Cullumber's management estimates returns using the expected value method and sales discounts are estimated using the most likely outcome. Based on past experience with this product, returns are 5% of sales 50% of the time, 10% of sales 20% of the time, and 20% of sales 30% of the time. Laxall Drug Stores will most likely pay within the discount period. Cullumber Company uses the contract-based approach for revenue recognition.

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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Make only correct Jornal entry 

Prepare journal entries to recognize revenue on the appropriate date. (Hint: The expected value method is also used to determine the amount for cost of goods sold and estimated inventory returns.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Accounts Receivable 50,000 Refund Liability 5,250 Sales 44,750 (To record sales on account.) Cost of Goods Sold 17,900 Estimated Inventory Returns 2,100 Merchandise Inventory 20,000 (To record cost of goods sold.)
Transcribed Image Text:Prepare journal entries to recognize revenue on the appropriate date. (Hint: The expected value method is also used to determine the amount for cost of goods sold and estimated inventory returns.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Accounts Receivable 50,000 Refund Liability 5,250 Sales 44,750 (To record sales on account.) Cost of Goods Sold 17,900 Estimated Inventory Returns 2,100 Merchandise Inventory 20,000 (To record cost of goods sold.)
On April 2, 2021, Cullumber Company entered into a contract to supply medication to Laxall Drug Stores, FOB shipping point, terms 2/30, n/45. The selling price of the medication is $50,000 and the medication cost Cullumber Company $20,000. Cullumber has a stated return policy that goods may be returned within 30 days. The medication was shipped on April 10, 2021. Cullumber's management estimates returns using the expected value method and sales discounts are estimated using the most likely outcome. Based on past experience with this product, returns are 5% of sales 50% of the time, 10% of sales 20% of the time, and 20% of sales 30% of the time. Laxall Drug Stores will most likely pay within the discount period. Cullumber Company uses the contract-based approach for revenue recognition.
Transcribed Image Text:On April 2, 2021, Cullumber Company entered into a contract to supply medication to Laxall Drug Stores, FOB shipping point, terms 2/30, n/45. The selling price of the medication is $50,000 and the medication cost Cullumber Company $20,000. Cullumber has a stated return policy that goods may be returned within 30 days. The medication was shipped on April 10, 2021. Cullumber's management estimates returns using the expected value method and sales discounts are estimated using the most likely outcome. Based on past experience with this product, returns are 5% of sales 50% of the time, 10% of sales 20% of the time, and 20% of sales 30% of the time. Laxall Drug Stores will most likely pay within the discount period. Cullumber Company uses the contract-based approach for revenue recognition.
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