Lopez Company reports unadjusted first-year merchandise sales of $100,000 and cost of merchandise sales of $30,000. a. Compute gross profit (using the unadjusted numbers above). b. The company expects future returns and allowances equal to 5% of sales and 5% of cost of sales. 1. Prepare the year-end adjusting entry to record the sales expected to be refunded. 2. Prepare the year-end adjusting entry to record the cost side of sales returns and allowances. 3. Recompute gross profit using the adjusted numbers from parts 1 and 2. c. Is Sales Refund Payable an asset, liability, or equity account? d. Is Inventory Returns Estimated an asset, liability, or equity account?
Lopez Company reports unadjusted first-year merchandise sales of $100,000 and cost of merchandise
sales of $30,000.
a. Compute gross profit (using the unadjusted numbers above).
b. The company expects future returns and allowances equal to 5% of sales and 5% of cost of sales.
1. Prepare the year-end
2. Prepare the year-end adjusting entry to record the cost side of sales returns and allowances.
3. Recompute gross profit using the adjusted numbers from parts 1 and 2.
c. Is Sales Refund Payable an asset, liability, or equity account?
d. Is Inventory Returns Estimated an asset, liability, or equity account?
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