Question

Assume the following data for Casper Company before its year-end adjustments:

Answer 1

Answer:

a. Journalize the adjusting entry for the estimated customer allowances.

• Dr Sales returns and allowances 10,500
•     Cr Customer refunds payable 10,500

The adjusting entry should = total sales x estimated percent of returns = $1,750,000 x 0.6% = $10,500

b. Journalize the adjusting entry for the estimated customer returns.

• Dr Estimated returns inventory 8,000
•     Cr Cost of merchandise sold 8,000

This amount is given in the question, $8,000, so you need to record it as a decrease in COGS and an increase in returns inventory.