Question

For the year ended December​ 31, 2019, Davidson Mart had sales of $ 550 comma 000 and cost of goods sold of $ 412 comma 500. Davidson estimates that approximately 2​% of the merchandise sold will be returned. The adjusting journal entry on December​ 31, 2019, would include a​ _______.

Answer 1

Answer and Explanation:

The adjusting entry is as follows

Sales return & allowances ($550,000 × 2%) $11,000  

      Refunds payable $11,000

(Being the recording of  estimated sales return is done)

For recording this we debited the sales returns & allowances as it increased the sales return and credited the refund payable as it also increased the liabilities