Question

Ivanhoe Choice sells natural supplements to customers with an unconditional sales return if they are not satisfied. The sales returns extends 60 days. On February 10, 2021, a customer purchases $3000 of products (cost $1500). Assuming that based on prior experience, estimated returns are 10%. The journal entry to record the expected sales return and cost of goods sold includes a_____________.a.credit to Refund Liability for $200.
b.credit to Returned Inventory for $100.
c.credit to Estimated Inventory Returns for $100.
d. debit to Estimated Inventory Returns for $100.

Answer 1

The journal entry to record the expected sales return and cost of goods sold includes a_____________

a.credit to Refund Liability for $200.

Explanation:

• Ivanhoe Choice sells natural supplements to customers with an unconditional sales return if they are not satisfied. The sales returns extends 60 days. On February 10, 2021, a customer purchases $3000 of products (cost $1500). Assuming that based on prior experience, estimated returns are 10%. The journal entry to record the expected sales return and cost of goods sold includes a_____________

• a.credit to Refund Liability for $200.
• The refund liability shows the amount of consideration that means the company does not expect to be entitled  because it will be refunded to customers.
• The liability should be represented for the amount of revenue expected to be refunded.
• Also the returns and refunds are disadvantageous for business for a product.