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Graw Hill Delfax Manufacturing allows its collected at the time of sale). The co

ID: 2542775 • Letter: G

Question

Graw Hill Delfax Manufacturing allows its collected at the time of sale). The company began y cost Delfax eive a credit to their accounts. All of Delfax's sales are for credit (no cash is ear 1 with an allowance for sales returns of customers to return merchandise for any reason up to 90 days ng year 1, Delfax sold merchandise on account for $12,000,000. This merchandise 38,400,000 (70% of selling prices). Also during the year, customers returned $400,000 or credit. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at in sales f the end of the year. Required: 1. Prepare the entry to record the merchandise returns and the year-end adjusting entry for What is the amount of the year-end allowance for sales returns after the adjusting entry is recorded? estimated returns. 2.

Explanation / Answer

2)Amount of year end allowance for sales return = beginning +estimation during the period -allowance reversed

        = 200000+600000-400000

        = $ 400000

Date Account Debit credit Year 1 Allowance for sales return 400000 Accounts receivable 400000 [being allowance for return made] merchandise inventory 280000 cost of goods sold 280000 [being cost of sales reversed for inventory returned][400000*.70] 2 sales return expense 600000 Allowance for sales return 600000 [being estimated for allowance made 12000000*.05]