Question

Lavender Corporation sells 100 jars of essential oil to Bed, Bath, and Relax on December 1, 20X5, for $10 each. Lavender offers a right to return the product for any reason. Based on past sales, Lavender expects Bed, Bath, and Relax to return 5 jars. What adjusting journal entry, if any, should Lavender record on December 31, 20X5, to reflect Bed, Bath, and Relax's right of return

Answer 1

Sales Returned and Allowances $50

Allowance for Sales Return and Allowances $50

Lavender expects 5 jars at $10 each ($50 total) to be returned.

Explanation:

Lavender Corporation sells 100 jars of essential oil to Bed, Bath, and Relax on December 1, 20X5, for $10 each. Lavender offers a right to return the product for any reason. Based on past sales, Lavender expects Bed, Bath, and Relax to return 5 jars

Using the above stated information we get  the given data :-

Sales Returned and Allowances $50

Allowance for Sales Return and Allowances $50

Lavender expects 5 jars at $10 each ($50 total) to be returned.

The adjusting journal entry on December 31 reflects

• The right of return by debiting Sales Returns and Allowances (a contra-revenue account) and
• Crediting Allowance for Sales Returns and Allowances (a contra-asset account to Accounts Receivable).