There are various appropriate accounting treatments when a sale is made subject to a right of return.These methods include:
A) recording the sale and accounting for the returns as they occur in future periods.
B) recording the cash received as held in trust until all return privileges have expired.
C) recording the sale but reducing sales by an estimate of the future returns.
D) recording the sale and accounting for the returns as they occur in future periods and recording the sale but reducing sales by an estimate of the future returns.

Question

Quizplus · Accepted Answer

Recording the sale and accounting for the returns as they occur in future periods ensures that the accounting records accurately reflect the business's financial standing over time. However, reducing sales by an estimate of the future returns also acknowledges that some customers may choose to return the product, which has an impact on the company's revenue. Therefore, the best choice is to combine both approaches by recording the sale and accounting for future returns while also reducing sales by an estimated amount to account for potential returns.

There Are Various Appropriate Accounting Treatments When a Sale Is