Zell Company had sales of $1,800,000 and related cost of merchandise sold of $1,150,000 for its first year of operations ending December 31, 2016. Zell Company provides customers a refund for any returned or damaged merchandise. At the end of the year, Zell Company estimates that customers will request refunds for 1.5% of sales and estimates that merchandise costing $16,000 will be returned. Assume that on February 3, 2017 Anderson Co. returned merchandise with a selling price of $5,000 for a cash refund. The returned merchandise originally cost Zell Company $3,100.

(a) Journalize the adjusting entries on December 31, 2016 to record the expected customer returns. Refer to the Chart of Accounts for exact wording of account titles. Scroll down to see the journal page for recording the returned merchandise and cash refund to Anderson Co.(b) Journalize the entries to record the returned merchandise and cash refund to Anderson Co. Refer to the Chart of Accounts for exact wording of account titles.

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haseebkhuhro256 haseebkhuhro256 · Answer 1 · 2020-03-04T04:19:02+01:00

Answer:

Explanation:

(a) year ended December 31, 2016

1) Entries that have been made at the time of sale

Cash/Bank 1800000

Sales 1800000

To record the revenue As per IFRS-15

2)

Cost of sales 1150000

Inventory 1150000

To record the cost of sales

3)

Sales 1.50% 27000

Provision for refund liability 27000

To record the provision for refund laibility

4)

Right of return Asset 16000

Cost of goods sold 16000

To record the cost of inventory against the refund of sales.

(b) entries to record the returned merchandise and cash refund to Anderson Co.

Provision for Refund liability 5000

Cash 5000

To record the actual return of sales

Inventory 3100

Right of return Asset 3100

To record the inventory returned against the return of sales