Question

Botanic Choice sells natural supplements to customers with an unconditional right of return if they are...

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.

Homework Answers

Answer #1
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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