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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Customer allowances and returns

Assume the following data for Lusk Inc. before its year-end adjustments:

  Unadjusted Balances  
  Debit Credit
Sales  

$3,600,000

Cost of Merchandise Sold

$2,100,000

 
Estimated Returns Inventory 1,800  
Customer Refunds Payable  

900

Estimated cost of merchandise that will be returned in the next year $15,000  
Estimated percent of refunds for current year sales 0.8%  

Journalize the adjusting entries for the following:

a. Estimated customer allowances

b. Estimated customer returns

a.

To determine

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

To Record: The adjusting entry for estimated customer allowances.

Explanation

Record the journal entry for the estimated customer allowance.

Date Accounts and Explanation Debit ($) Credit ($)
  Sales 28,800 (1)  
  Customer Refunds Payable   28,800
  (To record the sale of inventory on account after discount)    

Table (1)

Working Note:

Calculate the amount of sales.

Sales = $3,600,000

Estimated percent of refunds = 0...

b.

To determine

To Record: The adjusting entry for estimated customer returns.

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