Scott Company had sales of $12,050,000 and related cost of goods sold of $7,100,000 for the year ending December 31, 20Y8. Scott provides customers a refund for any returned or damaged merchandise. Scott Company estimates that customers will request refunds for 0.6% of sales and estimates that merchandise costing $53,000 will be returned in 20Y9. Journalize the adjusting entries on December 31, 20Y8, to record the expected customer returns. If an amount box does not require an entry, leave it blank.

Question

Business

Morgan Peterson

13 January, 05:22

Scott Company had sales of $12,050,000 and related cost of goods sold of $7,100,000 for the year ending December 31, 20Y8. Scott provides customers a refund for any returned or damaged merchandise. Scott Company estimates that customers will request refunds for 0.6% of sales and estimates that merchandise costing $53,000 will be returned in 20Y9. Journalize the adjusting entries on December 31, 20Y8, to record the expected customer returns. If an amount box does not require an entry, leave it blank.

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Christopher Reid · Answer 1

See explanation section.

Explanation:

December 31, 20Y8 Sales Debit $72,300

Customer Refunds Payable Credit $72,300

Note: Calculation: $12,050,000 * 0.6% = $72,300

(As the customers requested refunds for 0.6% of sales, we have to deduct it from total sales to give refund.)

December 31, 20Y8 Estimated Returns Inventory Debit $53,000

Cost of goods sold Credit $53,000

Note: As the returned products had the cost of sales, we have to give cost of goods sold journal assuming the company used perpetual inventory system.