Lacey Company recorded credit sales of $4,400,000 for the current year ended December 31. During the current year, the company recorded actual returns of $55,000. As of December 31, Lacey estimates sales returns at 3% of current year sales, originally made on account. It is the company's policy to provide refunds on account. Lacey uses a perpetual inventory system and records estimated returns at the end of the period. The balance in Refund Liability was $39,600 and the balance in Inventory-Estimated Returns was $15,840 on January 1 of the current year. a. Prepare the journal entries to record sales and cost of goods sold for the current year. Assume all sales are on account and cost of goods sold is 40% of the selling price. b. Prepare the journal entries to record actual returns during the current year. Include the cost of goods sold entry. c. Prepare the adjusting entries related to estimated returns on December 31. Include the cost of goods sold entry.
Lacey Company recorded credit sales of $4,400,000 for the current year ended December 31. During the current year, the company recorded actual returns of $55,000. As of December 31, Lacey estimates sales returns at 3% of current year sales, originally made on account. It is the company's policy to provide refunds on account. Lacey uses a perpetual inventory system and records estimated returns at the end of the period. The balance in Refund Liability was $39,600 and the balance in Inventory-Estimated Returns was $15,840 on January 1 of the current year. a. Prepare the journal entries to record sales and cost of goods sold for the current year. Assume all sales are on account and cost of goods sold is 40% of the selling price. b. Prepare the journal entries to record actual returns during the current year. Include the cost of goods sold entry. c. Prepare the adjusting entries related to estimated returns on December 31. Include the cost of goods sold entry.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
G.327.
Transcribed Image Text:Lacey Company recorded credit sales of $4,400,000 for the current year ended December 31. During the current year, the
company recorded actual returns of $55,000. As of December 31, Lacey estimates sales returns at 3% of current year
sales, originally made on account. It is the company's policy to provide refunds on account. Lacey uses a perpetual
inventory system and records estimated returns at the end of the period. The balance in Refund Liability was $39,600 and
the balance in Inventory-Estimated Returns was $15,840 on January 1 of the current year.
a. Prepare the journal entries to record sales and cost of goods sold for the current year. Assume all sales are on account
and cost of goods sold is 40% of the selling price.
b. Prepare the journal entries to record actual returns during the current year. Include the cost of goods sold entry.
c. Prepare the adjusting entries related to estimated returns on December 31. Include the cost of goods sold entry.
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