Our book distribution division sells to national bookstores. Our division allows

Question

Our book distribution division sells to national bookstores. Our division allows for up to 25% of sales in returns. For the past 4 years, returns have averaged 20%. We record revenue based on revenue recognition when the right of return exists. Total Sales for 2012 $ 9,000,000 Sales Still Available for return for six months $ 2,000,000 Actual Returns on Sales not returnable 21% 2011 Sales collected in 2012 $ 2,500,000 2011 Sales returned in 2012 19% Calculate the revenue to be recognized in fiscal year 2012. Show all calculations for full credit.

Explanation / Answer

Total sales =9,000,000
full revenue=total sales-(sum of returns)
=9,000,000-2,500,000*19/100-2,000,000*21/100
9,000,000-475,000-420,000
=$8,105,000
credit for 6 months is 420,000+475,000
credit= 895,000$

or you can SEE:

Total sales =9,000,000
full revenue=total sales-(sum of returns)
=9,000,000-2,500,000*9.5/100-2,000,000*10.5/100, since it is only for 6 months... the interest is half...!!
9,000,000-237,500-210,000
=$8,789,500
credit for 6 months is 237,500+210,000
credit= 447,500$

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