Indicate the income statement and balance sheet reporting by Pronghorn at October 31, 2020, of the information related to the Lynch transaction. Income Statement (partial) For the Quarter Ended October 31, 2020 Sales revenue 5510 Less v: Sales returns and allowances Net Sales Cost of goods sold Gross profit Balance Sheet (partial) October 31, 2020
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On October 2, 2020, Pronghorn Company sold $5,510 of its elite camping gear (with a cost of $3,470) to Lynch Outfitters. As part of the sales agreement, Pronghorn includes a provision that if Lynch is dissatisfied with the product, Pronghorn will grant an allowance on the sales price or agree to take the product back (although returns are rare, given the long-term relationship between Pronghorn and Lynch). Pronghorn expects total allowances to Lynch to be $770. On October 16, 2020, Pronghorn grants an allowance of $390 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog.
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