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The records of Garden Company indicate sales of $900,000, cost of goods sold of $500,000, an...

The records of Garden Company indicate sales of $900,000, cost of goods sold of $500,000, an ending inventory balance of $100,000, and estimated returns of 1% of sales. The adjusting journal entries to record estimated returns will include a

a. credit to Sales for $9,000.

b. credit to Customer Refunds Payable for $5,000.

c. debit to Inventory for $5,000.

d. debit to Sales for $9,000.

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Homework Answers

Answer #1

Sales = $900,000

Cost of goods sold = $500,000

Estimated sales returns = 1% of sales

= 900,000 x 1%

= $9,000

Cost of inventory returned = Cost of goods sold x 1%

= $5,000

To record estimated sales returns, Following journal entries are needed:

General Journal Debit Credit
Sales returns $9,000
Customer refunds payable $9,000
Inventory $5,000
Cost of good sold $5,000

Hence, correct option is c.

Kindly comment if you need further assistance.

Thanks‼!

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