Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product. The Gross Profit using the unadjusted figures.

Question

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Answer 1

Question

Chapter 5, Problem 21E

To determine

Concept Introduction:

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product.

The Gross Profit using the unadjusted figures.

Expert Solution

Answer to Problem 21E

Solution:

$\begin{array}{l} G r o s s \Pr o f i t = S a l e s - C o s t o f s a l e s \\ = $ 100, 000 - $ 30, 000 \\ = $ 70, 000 \end{array}$

It is given that the company expects future returns and allowances equal to 5% of sales and 5% of cost of sales.

Explanation of Solution

Adjusting entry to record the sales expected to be returned-

Particulars	Debit ($)	Credit ($)
Returns and allowances account	5,000
To Accounts receivable account		5,000

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n s a l e s = S a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 100, 000 \times 5 \div 100 \\ = $ 5, 000 \end{array}$

The adjusting entry to record the cost side of sales returns and allowance-

Date	Particulars	Debit ($)	Credit ($)
Jun 30	Inventory account	1,500
	To Cost of sales account		1,500

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n c o s t o f s a l e s = C o s t o f s a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 30, 000 \times 5 \div 100 \\ = $ 1, 500 \\ N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

The Gross Profit using the adjusted figures-

$\begin{array}{l} N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

$\begin{array}{l} R e v i s e d G r o s s P r o f i t = S a l e s - C o s t o f s a l e s \\ = $ 95, 000 - $ 28, 500 \\ = $ 66, 500 \end{array}$

To determine

To Identify: Is sales refund payable shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Sales refund payable shows a liability account which indicates the amount to be paid to the customers against sales returned made.

To determine

To Identify: Is inventory returns shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Solution:

Return of inventory increases the assets side by the returned amount of inventory and, hence shows an asset account.

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The income statement of a merchandising company includes Cost of Goods Sold (COGS) and gross profit, which are not found on a service company’s income statement. This is because merchandising companies sell physical products, while service companies provide intangible services. Service company income statements are simpler, usually showing revenue from services minus operating expenses like salaries, rent, and supplies. In short, the main difference is that merchandising firms track product costs and gross profit, while service companies do not. Respond to this post. agree or disagree

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Answer 2

Question

Chapter 5, Problem 21E

To determine

Concept Introduction:

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product.

The Gross Profit using the unadjusted figures.

Expert Solution

Answer to Problem 21E

Solution:

$\begin{array}{l} G r o s s \Pr o f i t = S a l e s - C o s t o f s a l e s \\ = $ 100, 000 - $ 30, 000 \\ = $ 70, 000 \end{array}$

It is given that the company expects future returns and allowances equal to 5% of sales and 5% of cost of sales.

Explanation of Solution

Adjusting entry to record the sales expected to be returned-

Particulars	Debit ($)	Credit ($)
Returns and allowances account	5,000
To Accounts receivable account		5,000

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n s a l e s = S a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 100, 000 \times 5 \div 100 \\ = $ 5, 000 \end{array}$

The adjusting entry to record the cost side of sales returns and allowance-

Date	Particulars	Debit ($)	Credit ($)
Jun 30	Inventory account	1,500
	To Cost of sales account		1,500

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n c o s t o f s a l e s = C o s t o f s a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 30, 000 \times 5 \div 100 \\ = $ 1, 500 \\ N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

The Gross Profit using the adjusted figures-

$\begin{array}{l} N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

$\begin{array}{l} R e v i s e d G r o s s P r o f i t = S a l e s - C o s t o f s a l e s \\ = $ 95, 000 - $ 28, 500 \\ = $ 66, 500 \end{array}$

To determine

To Identify: Is sales refund payable shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Sales refund payable shows a liability account which indicates the amount to be paid to the customers against sales returned made.

To determine

To Identify: Is inventory returns shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Solution:

Return of inventory increases the assets side by the returned amount of inventory and, hence shows an asset account.

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Answer 3

Question

Chapter 5, Problem 21E

To determine

Concept Introduction:

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product.

The Gross Profit using the unadjusted figures.

Expert Solution

Answer to Problem 21E

Solution:

$\begin{array}{l} G r o s s \Pr o f i t = S a l e s - C o s t o f s a l e s \\ = $ 100, 000 - $ 30, 000 \\ = $ 70, 000 \end{array}$

It is given that the company expects future returns and allowances equal to 5% of sales and 5% of cost of sales.

Explanation of Solution

Adjusting entry to record the sales expected to be returned-

Particulars	Debit ($)	Credit ($)
Returns and allowances account	5,000
To Accounts receivable account		5,000

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n s a l e s = S a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 100, 000 \times 5 \div 100 \\ = $ 5, 000 \end{array}$

The adjusting entry to record the cost side of sales returns and allowance-

Date	Particulars	Debit ($)	Credit ($)
Jun 30	Inventory account	1,500
	To Cost of sales account		1,500

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n c o s t o f s a l e s = C o s t o f s a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 30, 000 \times 5 \div 100 \\ = $ 1, 500 \\ N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

The Gross Profit using the adjusted figures-

$\begin{array}{l} N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

$\begin{array}{l} R e v i s e d G r o s s P r o f i t = S a l e s - C o s t o f s a l e s \\ = $ 95, 000 - $ 28, 500 \\ = $ 66, 500 \end{array}$

To determine

To Identify: Is sales refund payable shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Sales refund payable shows a liability account which indicates the amount to be paid to the customers against sales returned made.

To determine

To Identify: Is inventory returns shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Solution:

Return of inventory increases the assets side by the returned amount of inventory and, hence shows an asset account.

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Answer 4

Question

Chapter 5, Problem 21E

To determine

Concept Introduction:

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product.

The Gross Profit using the unadjusted figures.

Expert Solution

Answer to Problem 21E

Solution:

$\begin{array}{l} G r o s s \Pr o f i t = S a l e s - C o s t o f s a l e s \\ = $ 100, 000 - $ 30, 000 \\ = $ 70, 000 \end{array}$

It is given that the company expects future returns and allowances equal to 5% of sales and 5% of cost of sales.

Explanation of Solution

Adjusting entry to record the sales expected to be returned-

Particulars	Debit ($)	Credit ($)
Returns and allowances account	5,000
To Accounts receivable account		5,000

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n s a l e s = S a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 100, 000 \times 5 \div 100 \\ = $ 5, 000 \end{array}$

The adjusting entry to record the cost side of sales returns and allowance-

Date	Particulars	Debit ($)	Credit ($)
Jun 30	Inventory account	1,500
	To Cost of sales account		1,500

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n c o s t o f s a l e s = C o s t o f s a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 30, 000 \times 5 \div 100 \\ = $ 1, 500 \\ N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

The Gross Profit using the adjusted figures-

$\begin{array}{l} N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

$\begin{array}{l} R e v i s e d G r o s s P r o f i t = S a l e s - C o s t o f s a l e s \\ = $ 95, 000 - $ 28, 500 \\ = $ 66, 500 \end{array}$

To determine

To Identify: Is sales refund payable shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Sales refund payable shows a liability account which indicates the amount to be paid to the customers against sales returned made.

To determine

To Identify: Is inventory returns shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Solution:

Return of inventory increases the assets side by the returned amount of inventory and, hence shows an asset account.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 5, Problem 21E

To determine

Concept Introduction:

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product.

The Gross Profit using the unadjusted figures.

Expert Solution

Answer to Problem 21E

Solution:

$\begin{array}{l} G r o s s \Pr o f i t = S a l e s - C o s t o f s a l e s \\ = $ 100, 000 - $ 30, 000 \\ = $ 70, 000 \end{array}$

It is given that the company expects future returns and allowances equal to 5% of sales and 5% of cost of sales.

Explanation of Solution

Adjusting entry to record the sales expected to be returned-

Particulars	Debit ($)	Credit ($)
Returns and allowances account	5,000
To Accounts receivable account		5,000

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n s a l e s = S a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 100, 000 \times 5 \div 100 \\ = $ 5, 000 \end{array}$

The adjusting entry to record the cost side of sales returns and allowance-

Date	Particulars	Debit ($)	Credit ($)
Jun 30	Inventory account	1,500
	To Cost of sales account		1,500

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n c o s t o f s a l e s = C o s t o f s a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 30, 000 \times 5 \div 100 \\ = $ 1, 500 \\ N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

The Gross Profit using the adjusted figures-

$\begin{array}{l} N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

$\begin{array}{l} R e v i s e d G r o s s P r o f i t = S a l e s - C o s t o f s a l e s \\ = $ 95, 000 - $ 28, 500 \\ = $ 66, 500 \end{array}$

To determine

To Identify: Is sales refund payable shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Sales refund payable shows a liability account which indicates the amount to be paid to the customers against sales returned made.

To determine

To Identify: Is inventory returns shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Solution:

Return of inventory increases the assets side by the returned amount of inventory and, hence shows an asset account.

Answer 6

Chapter 5, Problem 21E

To determine

Concept Introduction:

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product.

The Gross Profit using the unadjusted figures.

Expert Solution

Answer to Problem 21E

Solution:

$\begin{array}{l} G r o s s \Pr o f i t = S a l e s - C o s t o f s a l e s \\ = $ 100, 000 - $ 30, 000 \\ = $ 70, 000 \end{array}$

It is given that the company expects future returns and allowances equal to 5% of sales and 5% of cost of sales.

Explanation of Solution

Adjusting entry to record the sales expected to be returned-

Particulars	Debit ($)	Credit ($)
Returns and allowances account	5,000
To Accounts receivable account		5,000

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n s a l e s = S a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 100, 000 \times 5 \div 100 \\ = $ 5, 000 \end{array}$

The adjusting entry to record the cost side of sales returns and allowance-

Date	Particulars	Debit ($)	Credit ($)
Jun 30	Inventory account	1,500
	To Cost of sales account		1,500

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n c o s t o f s a l e s = C o s t o f s a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 30, 000 \times 5 \div 100 \\ = $ 1, 500 \\ N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

The Gross Profit using the adjusted figures-

$\begin{array}{l} N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

$\begin{array}{l} R e v i s e d G r o s s P r o f i t = S a l e s - C o s t o f s a l e s \\ = $ 95, 000 - $ 28, 500 \\ = $ 66, 500 \end{array}$

Answer 7

Chapter 5, Problem 21E

To determine

Concept Introduction:

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product.

The Gross Profit using the unadjusted figures.

Answer 8

Expert Solution

Answer to Problem 21E

Solution:

$\begin{array}{l} G r o s s \Pr o f i t = S a l e s - C o s t o f s a l e s \\ = $ 100, 000 - $ 30, 000 \\ = $ 70, 000 \end{array}$

It is given that the company expects future returns and allowances equal to 5% of sales and 5% of cost of sales.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Adjusting entry to record the sales expected to be returned-

Particulars	Debit ($)	Credit ($)
Returns and allowances account	5,000
To Accounts receivable account		5,000

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n s a l e s = S a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 100, 000 \times 5 \div 100 \\ = $ 5, 000 \end{array}$

The adjusting entry to record the cost side of sales returns and allowance-

Date	Particulars	Debit ($)	Credit ($)
Jun 30	Inventory account	1,500
	To Cost of sales account		1,500

Working:

$\begin{array}{l} R e t u r n a n d a l l o w a n c e s o n c o s t o f s a l e s = C o s t o f s a l e s a m o u n t \times p e r c e n t a g e o f r e t u r n s \\ = $ 30, 000 \times 5 \div 100 \\ = $ 1, 500 \\ N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

The Gross Profit using the adjusted figures-

$\begin{array}{l} N e t s a l e s = S a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 100, 000 - $ 5, 000 \\ = $ 95, 000 \\ N e t c o s t o f s a l e s = C o s t o f s a l e s - E s t i m a t e d f u t u r e r e t u r n s a n d a l l o w a n c e s \\ = $ 30, 000 - $ 1, 500 \\ = $ 28, 500 \end{array}$

$\begin{array}{l} R e v i s e d G r o s s P r o f i t = S a l e s - C o s t o f s a l e s \\ = $ 95, 000 - $ 28, 500 \\ = $ 66, 500 \end{array}$

Answer 13

To determine

To Identify: Is sales refund payable shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Sales refund payable shows a liability account which indicates the amount to be paid to the customers against sales returned made.

Answer 14

To determine

To Identify: Is sales refund payable shows an asset, liability or equity account?

Answer 15

Expert Solution

Explanation of Solution

Sales refund payable shows a liability account which indicates the amount to be paid to the customers against sales returned made.

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

To determine

To Identify: Is inventory returns shows an asset, liability or equity account?

Expert Solution

Explanation of Solution

Solution:

Return of inventory increases the assets side by the returned amount of inventory and, hence shows an asset account.

Answer 20

To determine

To Identify: Is inventory returns shows an asset, liability or equity account?

Answer 21

Expert Solution

Explanation of Solution

Solution:

Return of inventory increases the assets side by the returned amount of inventory and, hence shows an asset account.

Answer 22

Expert Solution

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Ch. 5 - Prob. 1DQ Ch. 5 - 2. In comparing the accounts of a merchandising...Ch. 5 - Prob. 3DQ Ch. 5 - Prob. 4DQ Ch. 5 - Prob. 5DQ Ch. 5 - Prob. 6DQ Ch. 5 - Prob. 7DQ Ch. 5 - Prob. 8DQ Ch. 5 - Prob. 9DQ Ch. 5 - Prob. 10DQ

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product. The Gross Profit using the unadjusted figures.

Concept explainers

Videos

Concept Introduction:

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product.

The Gross Profit using the unadjusted figures.

Answer to Problem 21E

Explanation of Solution

To Identify: Is sales refund payable shows an asset, liability or equity account?

Explanation of Solution

To Identify: Is inventory returns shows an asset, liability or equity account?

Explanation of Solution

Want to see more full solutions like this?

Chapter 5 Solutions

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product. The Gross Profit using the unadjusted figures.

Concept explainers

Videos

Concept Introduction: Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product. The Gross Profit using the unadjusted figures.

Answer to Problem 21E

Explanation of Solution

To Identify: Is sales refund payable shows an asset, liability or equity account?

Explanation of Solution

To Identify: Is inventory returns shows an asset, liability or equity account?

Explanation of Solution

Want to see more full solutions like this?

Chapter 5 Solutions

Concept Introduction:

Estimated Future returns: These are the estimates made by the company with the consideration that the customers may return the sold product in the future if they are not satisfied with the product.

The Gross Profit using the unadjusted figures.