Question

Oriole Choice sells natural supplements to customers with an unconditional sales return if they are not satisfied. The sales returns period extends 60 days. On February 10, 2021, a customer purchases $3100 of products (cost $1550). Assuming that based on prior experience, estimated returns are 30%. The journal entry to record the actual return of $160 of merchandise includes a

Answer 1

Answer: See explanation

Explanation:

The journal entry to record the actual return of $160 of merchandise includes:

Debit Sales return and allowance $160

Credit Account receivable $160

Debit Returned Inventory $80

Credit Cost of goods sold $80

Note:

Returned inventory was calculated as:

= $160 × (1550/3100)

= $160 × 0.5

= $80