Question

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):_________.(A)Accounts Receivable 2,000,000 Sales 2,000,000(B)Sales returns and allowances 150,000 Sales 150,000Cost of Goods Sold 90,000 Inventory Returns Estimated 90,000(C)Sales 2,000,000 Sales Refund Payable 160,000Accounts receivable 1,840,000Sales Refund Payable 150,0000 Accounts receivable 150,000(D)Sales Returns and Allowances 150,000 Sales Refund Payable 150,000Inventory Returns Estimated 90,000 Cost of goods sold 90,000

Answer 1

Answer:

(D) Dr Sales Returns and Allowances 150,000

Cr Sales Refund Payable 150,000

Dr Inventory Returns Estimated 90,000

Cr Cost of goods sold 90,000

Explanation:

Based on the information given The adjusting Journal entry or entries to record the expected sales returns is (are):

Dr Sales Returns and Allowances 150,000

Cr Sales Refund Payable 150,000

[(8%*2,000,000)-10,000]

Dr Inventory Returns Estimated 90,000

Cr Cost of goods sold 90,000

[(8%*1,200,000-6,000]