Question

Organic Growth Company is a company which sells plant seed products. As part of the promotion,...

  1. Organic Growth Company is a company which sells plant seed products. As part of the promotion, the company grants unconditional returns to its five main customers if the product is deemed unsatisfactory. The right to return is valid for four months. Organic Growth's past

experience shows that the normal return rate is 20% (the company uses the ​allowance method​). Organic Growth sells the seeds on account for $1,500,000 (at a cost of $750,000) on January 2, 2019. Customers are required to pay the amount due by March 15, 2019.
Instructions:

  1. Prepare the necessary journal(s) for Organic Growth on January 2, 2019!

  2. Assume that one customer returns the seedlings on March 1, 2019 due to poor performance. Prepare the necessary journal(s) to record the transaction, if a customer buys the seeds at an

    amount of $100,000 from Organic Growth! (customer has not paid the receivable yet).

  3. Assume that Organic Growth prepares financial reports each quarter. Prepare the necessary journal entries (if any) to adjust for the above transaction on March 31, 2019, assuming the

    remaining expected return is $200,000.

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