Assume that during December 2013, Nordstrom sold $20 million of merchandise and another $12 million of gift cards, of which $24 million was on credit and the rest in cash. Nordstrom acquired the merchandise for $7.2 million. Further assume that Nordstrom estimates that 1% of all credit sales in December will be uncollectible, and customers will return 2% of all merchandise sold in December. Gift card sales are not included in merchandise sales for the purposes of estimating sales returns.
a. What journal entries will Nordstrom make in December 2013 to record December sales?
b. Assume that Nordstrom closes its books monthly. What adjusting entries will Nordstrom make in December 2013?
c. Assume no other transactions affecting taxable income for the month. How muchincome did Nordstrom earn before taxes in December 2013?
d. In January 2014, customers used gift cards to purchase $6 million of merchandise, with a cost to Nordstrom of $3.6 million. What journal entries will Nordstrom make in January 2014 to account for these sales? Assume the same sales return percentage as in