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Summary Business Accounting
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  • Course
  • Introduction to Economics
  • Institution
  • Cambridge College

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 accoun...

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  • July 27, 2022
  • 1
  • 2021/2022
  • Summary

Subjects

  • business accounting

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  • Cambridge College
  • Introduction to Economics
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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.



Answer:



Estimated returns = $10,600,000 x 8% = $848,000

Less: Actual returns (720,000)

Remaining estimated returns $128,000




Sales returns.......................................................................................... 128,000

Allowance for sales returns ............................................................. 128,000



Inventory—estimated returns ............................................................... 76,800

Cost of goods sold ($128,000 x 60%) .............................................. 76,800

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