Carnegie Corporation commissions, produces, and sells books through faith- based nonprofit organizations. The books are sold on the basis that a maximum of 50% of the quantity purchased can be returned within six months. The contract with the customer outlines the amount of consideration and the return policy and that payment is due within 30 days of the end of the return period. Carnegie has a good historical record of the proportion of books returned, on average. On 1 June, Carnegie sold $ 25,000 books. On 15 August, $ 4,000 books were returned and on 3 October, an additional $ 5,500 books were returned. The payment for the balance owing was received on 20 December. The cost of the books is 65% of the selling price. All of the returns are put back into inventory and can be resold.

Required:

1. Assess the five steps and determine when revenue and related costs should be recognized.

2. Prepare the appropriate journal entries that are required for the described transactions.