Beethoven Music Company started business in March 2016.Sales for its first year were $400,000.Beethoven priced its merchandise to yield a 45% gross profit based on sales dollars.Industry statistics suggest that 10% of the merchandise sold to customers will be returned.Beethoven estimated its sales returns based on the industry average.During the year,customers returned $30,000 in sales.Beethoven uses a perpetual inventory system.
Required:
Prepare summary journal entries to record (1)sales, (2)sales returns,and (3)the year-end adjusting entry for estimated sales returns.Assume that cash has not yet been collected for merchandise that could yet be returned.

Question

Quizplus · Accepted Answer

The Answer of Beethoven Music Company started business in March 2016.Sales for its first year were $400,000.Beethoven priced its merchandise to yield a 45% gross profit based on sales dollars.Industry statistics suggest that 10% of the merchandise sold to customers will be returned.Beethoven estimated its sales returns based on the industry average.During the year,customers returned $30,000 in sales.Beethoven uses a perpetual inventory system.
Required:
Prepare summary journal entries to record (1)sales, (2)sales returns,and (3)the year-end adjusting entry for estimated sales returns.Assume that cash has not yet been collected for merchandise that could yet be returned.

Beethoven Music Company Started Business in March 2016