Question

In the current year, Borden Corporation had sales of $2,190,000 and cost of goods sold of $1,295,000. Borden expects returns in the following year to equal 6% of sales. The unadjusted balance in Inventory Returns Estimated is a debit of $25,000, and the unadjusted balance in Sales Refund Payable is a credit of $29,000. The adjusting entry or entries to record the expected sales returns is (are):

Answer 1

Answer:

The entries are as follows

To record estimated returns on Sales

Debit: Sales Refund Payable Account $131,400

Credit: Accounts Receivables $131,400

To record estimated Cost of Sales returns

Debit: Inventory Returns Estimated Account $77,700

Credit: Inventory on Sales on Returns $77,700

Explanation:

To derive the figure for Sales Refund payable for the year

6% of $2,190,000

= $\frac{6}{100} * 2,190,000$ = $131,400

To derive the figure for Inventory cost on Sales Refund payable for the year

6% of $1,295,000

= $\frac{6}{100} * 1,295,000$ = $77,700