Question: In 2018 for the first time Rumsey Ltd offered customers

In 2018, for the first time, Rumsey Ltd. offered customers a 30-day, no questions asked, returns policy for unused merchandise. For the year ended December 31, 2018, Rumsey's management estimated that $10,000 of merchandise would be returned under the policy during January 2019. Rumsey has $525,000 of accounts receivable on December 31, 2018 before accounting for the estimated returns. Sales for the year before adjusting for sales returns is $4,125,000.

a. What journal entry should Rumsey record for 2018 for estimated sales returns?
b. What amounts would be reported for accounts receivable and sales after the entry is made?
c. What entry would be recorded if, on January 7, 2019, $2,000 of merchandise was returned?

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  • CreatedFebruary 26, 2015
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