Raven Company started business in March 2019. Sales for the first year totaled P4,000,000. The entity priced its merchandise to yield a 40% gross profit based on sales. Industry statistics suggest that 10% of the merchandise sold to customers will be returned. The entity estimated sales returns based on the industry average. During the year, customers returned goods with sale price of P300,000. Required: Prepare journal entries to record sales, sales returns and the year-end adjusting entry for estimated sales returns.
Raven Company started business in March 2019. Sales for the first year totaled P4,000,000. The entity priced its merchandise to yield a 40% gross profit based on sales. Industry statistics suggest that 10% of the merchandise sold to customers will be returned. The entity estimated sales returns based on the industry average. During the year, customers returned goods with sale price of P300,000. Required: Prepare journal entries to record sales, sales returns and the year-end adjusting entry for estimated sales returns.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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7.
Transcribed Image Text:Problem 4-7 (IAA)
Raven Company started business in March 2019. Sales for
the first year totaled P4,000,000. The entity priced its
merchandise to yield a 40% gross profit based on sales.
Industry statistics suggest that 10% of the merchandise sold
to customers will be returned.
The entity estimated sales returns based on the industry
average. During the year, customers returned goods with
sale price of P300,000.
Required:
Prepare journal entries to record sales, sales returns and
the year-end adjusting entry for estimated sales returns.
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