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Adjusting entry for customer refunds, allowances, and returns Scott Company had sales of $12,350,000 and related cost of goods sold of $7,500,000. Scott provides customers a refund for any returned or damaged merchandise. At the end of the year, Scott estimates that customers will request refunds for 0.8% of sales and estimates that merchandise costing $48,000 will be returned. Journalize the adjusting entries on December 31 to record the expected customer returns.

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Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535

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Chapter
Section
BuyFindarrow_forward

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535
Chapter 5, Problem 5.27EX
Textbook Problem
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Adjusting entry for customer refunds, allowances, and returns

Scott Company had sales of $12,350,000 and related cost of goods sold of $7,500,000. Scott provides customers a refund for any returned or damaged merchandise. At the end of the year, Scott estimates that customers will request refunds for 0.8% of sales and estimates that merchandise costing $48,000 will be returned. Journalize the adjusting entries on December 31 to record the expected customer returns.

To determine

Sales is an activity of selling the merchandise inventory of a business.

To Record: The adjusting entry for estimated customer allowances.

Explanation of Solution

Working Note:

Calculate the amount of sales.

Sales = $12,350,000

Estimated percent of refunds = 0.8%

Amount of sales = Sales×Estimated percent ofrefunds$12,350,000×0

To determine

To Record: The adjusting entry for estimated customer returns.

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Chapter 5 Solutions

Corporate Financial Accounting
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