Question

Brilliant Ltd sells 3,000 products for $150 each on a cash basis. Customers are allowed by the company to return any unused product within 30 days and receive a full refund. The cost of each product is $80. Based on the company’s past experience, an estimated 120 products will be returned. The company also estimates that the cost of recovering the products will be immetarial and expects that the returned products can be resold at a profit.

Assuming that transactions occur in accordance with expectations, provide the journal entries to record the sale, and the subsequent return of the assets.

Answer 1

In the Books of Brilliant Ltd

Journal

Date	Particulars	L.F.	Dr.( In $)	Cr.(in $)
1.	Cash A/c                Dr. (3000*$150)       To Sales A/c (Being sales of 3000 units @$150 each)		450,000	450,000
2.	Sales Return A/c Dr. (120*$150)        To Cash A/c    (Being 120 unit returned @ $150 each)		18,000	18,000
3.	Inventory A/c       Dr.   (120*$80)         To cost of goods sold ( Being related cost of goods sold adjustment done)		9,600	9,600