Answer:
Dr sales return $105,000
Cr allowance for sales returns $105,000
Explanation:
The estimated sales return is 8% of total sales
total sales=costs of goods sold*100/60=$6,900,000*100/60=$11,500,000.00
Actual returns till date=$700,000
Year-end adjusting in respect of sales returns is the estimated sales return minus the actual return till date as calculated thus:
estimated sales return=$11,500,000*7%=$805,000
Year-end adjusting amount=$805,000.00-$700,00.00=$105,000.00
The appropriate entries would to debit sales returns with $105,000 while allowance for sales returns is credited
