Question

In its first year of business, Borden Corporation had sales of $2,000,000 and cost of goods sold of $1,200,000. Borden expects returns in the following year to equal 8% of sales. The adjusting entry or entries to record the expected sales returns is (are):

Answer 1

Answer:

The adjusting entry are shown below.

Explanation:

According to the scenario, the adjusting entry that can be shown are as follows;

Journal Entry

Sales return and allowance A/c Dr    $160,000

To sales refund payable A/c    $160,000

( Being Sales return is recorded)

The computation is shown below:

For sales return:

= $2,000,000 × 8%

= $160,000

Journal Entry

Inventory Returns A/c Dr   $96,000

To Cost of goods sold A/c    $96,000

(Being the cost of goods is recorded)

The computation is shown below:

For inventory return:

= $1,200,000 × 8%

= $96,000