Exercise 78 Sales returns LO74 Halifax Manufacturing allows

Exercise 7-8 Sales returns [LO7-4 Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax\'s sales are for credit t (no cash is collected at the time of sale). The company began 2018 with an allowance for sales returns of $340,000. During 2018, Halifax sold merchandise on account for $11,900,000. This merchandise cost Haliífax $7735,000 (65% of selling prices). Also during the year, customers returned $580,000 in sales for credit. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year. pr actual merchandse retur Required: a year-end entry to adjust the allowance for sales returns to its appropriate balance. 2. What is the amount of the year-end allowance for sales returns after the adjusting entry is recorded? Complete this question by entering your answers in the tabs below. Prepare an entry to record actual merchandise returns as they occur (not adjusting the allowance for sales returns), and then record a year-end entry to adjust the allowance for sales returns to its appropriate balance. (If no entry is required for a transaction/event, select \"No journal entry required\" in the first account field) View transaction list Journal entry worksheet 3

Solution

1 Date General Journal Debit Credit 2018 Sales Return $        580,000 Accounts receivable $                 580,000 Inventory $        377,000 (580000 x65%) Cost of goods sold $                 377,000 (To record the Actual Sales Returns) Dec 31 Sales Return $          15,000 Allowance for sales returns $                   15,000 Inventory - Estimated returns $            9,750 (15000 x 65%) Cost of goods sold $                     9,750 (to record the estimated sales return) Estimated returns $        595,000 (5% x 11900000) Less: Actual Returns $        580,000 Remaining Estimated Returns $          15,000 2 Beginning balance in allowance $        340,000 2018 Credit to allowance $          15,000 Ending Balance in Allowance $        355,000