Question

Marlin Pools and Spas sold 80 hot tubs at $4,500 each. The cost of the hot tubs to Marlin is $2,600. The terms of the sale include a right to return for full refund within 30 days of purchase. Marlin expects that 3 of the hot tubs will be returned. Marlin follows IFRS 15.

a) Record the journal entries related to the above transactions. Assume 1 hot tub is returned within the 30 days.

b) Now assume Marlin uses ASPE, prepare the journal entries for the above transactions.

Answer 1

A. Under IFRS 15 - SALE WITH A RIGHT OF RETURN

Accounts	Debit	Credit
Cash (80* 4500)	360000
Sales Revenue (77 *4500)		346500
Refund Liability (3*4500)		13500
(To record sales with right to return goods )
Cost of goods sold (77 * 2600 )	200200
Inventory to be returned ( 3 * 2600 )	7800
Inventory		208000
(to record Cogs with right to return goods )

B. Under ASPE - SALE WITH A RIGHT OF RETURN

Accounts	Debit	Credit
Cash (80* 4500)	360000
Sales Revenue		360000
(To record sales )
Cost of goods sold (80* 2600 )	208000
Inventory		208000
(to record Cogs)
Sales return (3*4500)	13500
Sales return Allowance account(3*4500)		13500
(to create Allowance account )