Question

On July 10, 2020, Sarasota Music sold CDs to retailers on account and recorded sales revenue of $717,000 (cost $573,600). Sarasota grants the right to return CDs that do not sell in 3 months following delivery. Past experience indicates that the normal return rate is 15%. By October 11, 2020, retailers returned CDs to Sarasota and were granted credit of $71,200. Prepare Sarasota’s journal entries to record (a) the sale on July 10, 2020, and (b) $71,200 of returns on October 11, 2020, and on October 31, 2020. Assume that Sarasota prepares financial statement on October 31, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Answer 1

	Account Titles and Explanation	Debit	Credit
July 10 2020	Accounts receivables	$       7,17,000
	Sales revenue		$       7,17,000
	Cost of goods sold	$       5,73,600
	Inventory		$       5,73,600
Oct 11 2020	Sales return and allowances	$           71,200
	Accounts receivables		$           71,200
	Returned Inventory [($573600/$717000) X $71200]	$           56,960
	Cost of goods sold		$           56,960
Oct 31 2020	No Entry