Botanic Choice sells natural supplements to customers with an unconditional right of return if they are not satisfied. The right of return extends 60 days. On February 10, 2021, a customer purchases $6,000 of products (cost $3,000) on account. Based on its prior experience, Botanic Choice estimates returns will be 15%. On April 5, 2021, the customer returns $400 of merchandise.
Required:
Prepare the necessary journal entries to record the transactions on February 10, 2021, and April 5, 2021.
Date | Particulars | Debit | Credit |
10-Feb | Accounts Receivable | $ 6,000.00 | |
Sales | $ 5,100.00 | ||
Refund Liability (6000*15%) | $ 900.00 | ||
( to record sale and possibe return) | |||
10-Feb | Cost of Goods Sold | $ 2,550.00 | |
Refund Asset (3000*15%) | $ 450.00 | ||
Inventory | $ 3,000.00 | ||
( To record COGS and for possible return) | |||
5th April | Refund Liabilty | $ 400.00 | |
Accounts Receivable | $ 400.00 | ||
(To record actual return) | |||
5th April | Inventory | $ 200.00 | |
Refund Asset (3000/6000*400) | $ 200.00 | ||
(to Record Cost of goods returned) |
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