Sells merchandise to customers. Cost of inventory is 70% of the selling price. • Lowes uses a gross method to account for sales discount on early receipt of accounts receivables. . The terms for all Account Receivables are 2/10, n/30. Merchandise becomes unreturnable after 5 months. In 2021, the beginning inventory for Lowes was $1,000,000. Lowes' sales transactions during 2021-2022 are as follows: 2021 12/1/2021 Sold customer A on account merchandise for $800,000 12/15/2021 Customer A returned $10,000 merchandise. Established allowance of return. Industry experience 12/31/2021 indicates that 20% of annual gross sales will be returned. 12/31/2021 Established allowance of 30% of the remaining AR balance 2022 2/1/2022 Customer A returned $20,000 merchandise. 4/30/2022 Sales to Customer A become unreturnable. 5/1/2022 Customer A went bankrupt and the remaining AR will not be collectible: 12/31/2022 Established allowance of 30% of the remaining AR balance Which of the following is correct about journal entry Lowe's make on 4/30/20223
Sells merchandise to customers. Cost of inventory is 70% of the selling price. • Lowes uses a gross method to account for sales discount on early receipt of accounts receivables. . The terms for all Account Receivables are 2/10, n/30. Merchandise becomes unreturnable after 5 months. In 2021, the beginning inventory for Lowes was $1,000,000. Lowes' sales transactions during 2021-2022 are as follows: 2021 12/1/2021 Sold customer A on account merchandise for $800,000 12/15/2021 Customer A returned $10,000 merchandise. Established allowance of return. Industry experience 12/31/2021 indicates that 20% of annual gross sales will be returned. 12/31/2021 Established allowance of 30% of the remaining AR balance 2022 2/1/2022 Customer A returned $20,000 merchandise. 4/30/2022 Sales to Customer A become unreturnable. 5/1/2022 Customer A went bankrupt and the remaining AR will not be collectible: 12/31/2022 Established allowance of 30% of the remaining AR balance Which of the following is correct about journal entry Lowe's make on 4/30/20223
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:owes sells merchandise to customers. Cost of inventory is 70% of the selling price.
• Lowes uses a gross method to account for sales discount on early receipt of
accounts receivables.
. The terms for all Account Receivables are 2/10, n/30.
• Merchandise becomes unreturnable after 5 months.
In 2021, the beginning inventory for Lowes was $1,000,000. Lowes' sales
transactions during 2021-2022 are as follows:
2021
12/1/2021 Sold customer A on account merchandise for $800,000
12/15/2021 Customer A returned $10,000 merchandise.
Established allowance of return. Industry experience
12/31/2021 indicates that 20% of annual gross sales will be returned.
12/31/2021 Established allowance of 30% of the remaining AR balance
2022
2/1/2022 Customer A returned $20,000 merchandise.
4/30/2022 Sales to Customer A become unreturnable.
5/1/2022 Customer A went bankrupt and the remaining AR will not be
collectible:
12/31/2022 Established allowance of 30% of the remaining AR balance
Which of the following is correct about journal entry Lowe's make on 4/30/2022?
Transcribed Image Text:Multiple Choice
O
O
O
Debit Refund Liability for $130,000.
Credit Inventory-estimated returns for $105,000.
Debit Inventory for $91,000
Credit Account revable for $130,000.
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