Question

53) In the current year, Borden Corporation had sales of $2,000,000 and cost of goods sold of $1,200,000. Borden expects returns in the following year to equal 8% of sales. The unadjusted balance in Inventory Returns Estimated is a debit of $6,000, and the unadjusted balance in Sales Refund Payable is a credit of $10,000. The adjusting entry or entries to record the expected sales returns is (are):

Answer 1

Answer: See explanation

Explanation:

The adjusting entry or entries to record the expected sales returns are:

Debit: sales return and allowance = $150,000

Credit: Sales refund payable = $150,000

The above $150,000 was gotten as:

= ($2,000,000 × 8%) - $10,000

= ($2,000,000 × 0.08) - $10,000

= $160,000 - $10,000

= $150,000

Also,

Debit: Inventory returns estimated = $90,000

Credit: Cost of goods sold = $90,000

The above $90,000 was gotten as:

= ($1,200,000 × 8%) - $6,000

= ($1,200,000 × 0.08) - $6,000

= $96,000 - $6,000

= $90,000