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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

CALCULATION OF COST OF GOODS SOLD: PERIODIC INVENTORY SYSTEM WITH SALES RETURNS AND ALLOWANCES Use the same information as provided in Exercise 14-3A, but assume the business makes estimates for sales returns and allowances at year-end. The balances for estimated returns inventory are provided below. Prepare the cost of goods sold section of the income statement.

Beginning estimated returns inventory $2,000
Ending estimated returns inventory 1,600

To determine

Prepare the cost of goods sold section of the income statement.

Explanation

Periodic inventory system:

The method or system of recording the transactions related to inventory occasionally or periodically are referred to as periodic inventory system.

Adjustments for sales returns and allowances:

The sales returns and allowances accounts are debited and accounts receivable account is credited if, customers return merchandise purchased this year or the previous year.

No entries are made to customer refunds payable during the year under the periodic method of merchandise inventory.

Estimated returns inventory:

Estimated returns inventory is an asset account the states the estimated cost of merchandise inventory that is sold this year, however, it is probably returned in the next year. This account is reported on the balance sheet as current asset and it is frequently combined with merchandise inventory.

Prepare the cost of goods sold section:

Cost of goods sold: Amount Amount Amount Amount
Merchandise inventory beginning>&#...

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