Question

Romeo Inc sells white boards that are sold to schools. Each white board has a fixed price, f.o.b shipping point and payment is due 90 days after shipment. The schools can return a maximum of 15% of the order at their own expense. Sales are only made to schools, because they generally have great credit ratings. The normal return rate is 6% and the average collection period is 100 days. Romeo Inc follows IFRS. On July 16th, 2020 Romeo shipped white boards with a cost of $300,000 and included an invoice for $450,000. On August 30th, one school returned some white boards with an original invoice cost of $15,000. Romeo follows IFRS.

On July 16th, how much accounts receivable should Romeo record as a result of the sale of white boards?

On July 16th, how much cost of goods sold is record?

On August 30th, one school returned some white boards with an original invoice cost of $15,000. Romeo follows IFRS. which account of the following accounts would be debited to account for the return?

Answer 1