On October 2, 2020, Ivanhoe Company sold $5,630 of its elite camping gear (with a cost of $3,320) to Lynch Outfitters. As part of the sales agreement, Ivanhoe includes a provision that if Lynch is dissatisfied with the product, Ivanhoe 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 Ivanhoe and Lynch). Ivanhoe expects total allowances to Lynch to be $760. On October 16, 2020, Ivanhoe grants an allowance of $400 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog. Prepare journal entries for Ivanhoe to record (1) the sale on October 2, 2020, (2) the granting of the allowance on October 16, 2020, and, (3) any adjusting required on October 31, 2020 (when Ivanhoe prepares financial statements). Ivanhoe now estimates additional allowances of $260 will be granted to Lynch in the future. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) No Account Titles and Explanation Debit Credit (1) (To record sales on account) (To record cost of goods sold) (2) (To record allowance) (3) (To record estimated remaining allowances) Indicate the income statement and balance sheet reporting by Ivanhoe at October 31, 2020, of the information related to the Lynch transaction. Income Statement (partial) $ : $ Balance Sheet (partial) $ : $
On October 2, 2020, Ivanhoe Company sold $5,630 of its elite camping gear (with a cost of $3,320) to Lynch Outfitters. As part of the sales agreement, Ivanhoe includes a provision that if Lynch is dissatisfied with the product, Ivanhoe 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 Ivanhoe and Lynch). Ivanhoe expects total allowances to Lynch to be $760. On October 16, 2020, Ivanhoe grants an allowance of $400 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog. Prepare journal entries for Ivanhoe to record (1) the sale on October 2, 2020, (2) the granting of the allowance on October 16, 2020, and, (3) any adjusting required on October 31, 2020 (when Ivanhoe prepares financial statements). Ivanhoe now estimates additional allowances of $260 will be granted to Lynch in the future. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) No Account Titles and Explanation Debit Credit (1) (To record sales on account) (To record cost of goods sold) (2) (To record allowance) (3) (To record estimated remaining allowances) Indicate the income statement and balance sheet reporting by Ivanhoe at October 31, 2020, of the information related to the Lynch transaction. Income Statement (partial) $ : $ Balance Sheet (partial) $ : $
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 15E: On January 1, 2019, Piper Company entered into an agreement with Save-Mart to sell its most popular...
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On October 2, 2020, Ivanhoe Company sold $5,630 of its elite camping gear (with a cost of $3,320) to Lynch Outfitters. As part of the sales agreement, Ivanhoe includes a provision that if Lynch is dissatisfied with the product, Ivanhoe 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 Ivanhoe and Lynch). Ivanhoe expects total allowances to Lynch to be $760. On October 16, 2020, Ivanhoe grants an allowance of $400 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog.
Prepare journal entries for Ivanhoe to record (1) the sale on October 2, 2020, (2) the granting of the allowance on October 16, 2020, and, (3) any adjusting required on October 31, 2020 (when Ivanhoe prepares financial statements). Ivanhoe now estimates additional allowances of $260 will be granted to Lynch in the future. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)
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No
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Account Titles and Explanation
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Debit
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Credit
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(1)
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(To record sales on account)
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(To record cost of goods sold)
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(2)
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(To record allowance)
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(3)
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(To record estimated remaining allowances)
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Indicate the income statement and balance sheet reporting by Ivanhoe at October 31, 2020, of the information related to the Lynch transaction.
| Income Statement (partial) |
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| $ | ||
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| $ |
| Balance Sheet (partial) |
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| $ | ||
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| $ |
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