Brief Exercise 18A-14 Kristin Company sells 400 units of its products for $20 ea

Question

Brief Exercise 18A-14

Kristin Company sells 400 units of its products for $20 each to Logan Inc. for cash. Kristin allows Logan to return any unused product within 30 days and receive a full refund. The cost of each product is $11. To determine the transaction price, Kristin decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the probability-weighted amount. Using the probability-weighted amount, Kristin estimates that (1) 10 products will be returned and (2) the returned products are expected to be resold at a profit. Prepare the journal entry for Kristin at the time of the sale to Logan. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

No.

Account Titles and Explanation

Debit

Credit

(To record sale)

(To record cost of goods sold)

No.

Account Titles and Explanation

Debit

Credit

(1)

(To record sale)

(2)

(To record cost of goods sold)

Explanation / Answer

4400

Date Title Debit credit 1 cash 8000 Refund Liability (10* 20) 200 sales (390*20) 7800 [sales made recorded(400*20)] 2 Cost of good sold (390*11) 4290 Estimated inventory returns (10*11) 110 Inventory

4400

[Being cost of goods sold recorded

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