Answer:
Date Accounts titles Debit Credit
A)
Dec. 31 Sales returns and allowances $125,000
Accounts receivable $125,000
Merchandise Inventory $80,000
Cost of Good sold $80,000
B)
Dec. 31 Cost of Good sold $23,250
Merchandise Inventory $23,250
Note: Inventory Shrinkage = Account balance of inventory - Physical inventory on hand
= $1,333,150 - $1,309,900
= $23,250
Answer:
A. DR Sales and CR Customer Refunds Payable
DR Estimated Returns Inventory CR COGS
B. DR COGS CR Inventory
Explanation:
A. At the end of an accounting period, sellers are required to estimate returns and allowances. Two entries are required. The first reduces Sales account and increases a Customer Refunds Payable account for the estimated returns and allowances to be given to customers in the future. The second creates an Estimated Returns Inventory account and reduces the Cost of Goods Sold account for the cost of the merchandise expected to be returned.
B. Inventory shrinkage is recorded by decreasing merchandise inventory and increasing cost of merchandise sold for the difference between the perpetual inventory records and the inventory on hand.
