During 2013, its first year of operations, Hollis Industries recorded sales of $

Question

During 2013, its first year of operations, Hollis Industries recorded sales of $10,600,000 and experienced returns of $720,000. Cost of goods sold totaled $6,360,000 (60% of sales). The company estimates that 8% of all sales will be returned.

  

Prepare the year-end adjusting journal entries to account for anticipated sales returns. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)

Prepare the year-end adjusting journal entries to account for anticipated sales returns. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)

Explanation / Answer

Answer:

Journal Entries Date Accounts Title and Explanation Debit $ Credit $ Dec, 31 Sales(Revenue)       128,000 Allowance for sales return     128,000 (To record Allowance for sales return 10,600,000*8%   - 720,000) Dec, 31 Inventory          76,800 Cost of goods sold       76,800 (To record cost of goods sold on allowance for sales return 128,000*60%) Assumption:- Company follows perpetual inventory system.

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