Chapter 5, Problem 5.63BP

(Learning Objectives 1, 2: Apply GAAP for proper revenue recognition; account for sales returns and allowances) Dearborn Industries sells to wholesalers. Customers must pay within 15 days or at the point of sale using a credit card. Dearborn’s cost of goods sold is 35% of sales. The company had the following selected transactions during March:

March 3	Sold $25,000 of merchandise to Greenleaf Company on account.
March 4	Sold $4,000 of merchandise to Yardley Corp., who paid by credit card, The credit card company charges Dearborn a fee of 2% on credit card sales.
March 5	Greenleaf Company returned $5,000 of the merchandise from March 3.
March 7	Sold $1,000 of merchandise to Athens, Inc., on account.
March 15	Greenleaf Company paid the balance of what it owed for the purchase on March 3.
March 19	Sold $12,000 of merchandise to Zurich Co. on account.
March 21	Zurich reported that some of the merchandise received was scratched and returned $500 worth of merchandise to Dearborn.
March 23	Sold $38,000 of merchandise to Niles Co. on account.
March 25	Zurich paid the balance of what it owed for the purchase on March 19.
March 31	Dearborn made the adjusting entries for the month to accrue for estimated future returns. Dearborn estimates that 4% of total sales will be returned.

Requirements

1. Record Dearborn’s transactions, including the cost of goods sold entry for each sale.

2. Calculate the gross sales revenue for the month.