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III- Exercises
1. Smith and Son's Department Store has a policy that allows customers to return merchandise
for up to 45 days for a full refund. Based on prior experience, approximately 8% of
merchandise sold will be returned.
In November, the store's total sales were $2,500,000, all for cash. The cost of the
merchandise sold was $1,600,000.
On November 30, the company prepared the adjusting entries for sales returns.
In December, within the allowable return period, customers returned merchandise that
retailed for $100,000 and that cost $66,000 for a refund.
Prepare the journal entries for these transactions. Omit explanations.

Respuesta :

anthougo

The preparation of the journal entries for the transactions of Smith and Son's Department Store is as follows:

Journal Entries:

November 30

Debit Accounts Receivable $2,500,000

Credit Sales Revenue $2,500,000

Debit Cost of goods sold $1,600,000

Credit Inventory $1,600,000

Adjusting Entries:

Debit Inventory $128,000

Credit Cost of goods sold $128,000


Debit Sales Returns $200,000

Credit Accounts Receivable $200,000

December 31

Debit Accounts Receivable $100,000

Credit Sales Returns $100,000

Debit Cost of goods sold $62,000

Credit Inventory $62,000

Data and Calculations:

Total sales for November = $2,500,000

Expected sales returns = $200,000 ($2,500,000 x 8%)

Cost of goods sold = $1,600,000

The expected cost of returnable goods = $128,000 ($1,600,000 x 8%)

Actual sales returns = $100,000

Actual cost of returned goods = $66,000

Transaction Analysis:

November 30: Accounts Receivable $2,500,000 Sales Revenue $2,500,000

Cost of goods sold $1,600,000 Inventory $1,600,000

Inventory $128,000 Cost of goods sold $128,000

November 30: Sales Returns $200,000 Accounts Receivable $200,000

December 31: Accounts Receivable $100,000 Sales Returns $100,000

Cost of goods sold $62,000 Inventory $62,000

Thus, the journal entries for the business dealings of Smith and Son's Department Store have been prepared as above.

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Parrain

Based on the transactions by Smith and Son's Department Store, the journal entries are:

Date                 Accounting title                             Debit              Credit

November        Cash                                         2,500,000

                          Sales                                                                 2,500,000

November         Cost of goods sold                1,600,000

                           Inventory                                                        1,600,000

December          Sales Return                             100,000

                           Cash                                                                 100,000

December          Inventory                                     66,000

                           Cost of Goods sold                                            66,000

How can Smith and Son's Department Store transactions be journalized?

When cash sales are made, the sales account should be credited and the cash should be debited.

Cost of goods sold should be debited as it is an expense, and inventory should be credited as it is decreasing. Sales returns are debited which leads to inventory being debited as well.

Find out more on journalizing sales returns at https://brainly.com/question/22851563

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