Sales Returns and Allowances
Assume that Olympia Corporation follows ASPE and estimates that approximately 5% of its $1.5 million of trade receivables outstanding will be returned or some adjustment will be made to the sales price.
Instructions
a) Prepare the entry to show expected sales returns and allowances.
b) Explain why it is important to prepare and include this entry in Olympia's financial statements.

Question

Quizplus · Accepted Answer

The Answer of Sales Returns and Allowances
Assume that Olympia Corporation follows ASPE and estimates that approximately 5% of its $1.5 million of trade receivables outstanding will be returned or some adjustment will be made to the sales price.
Instructions
a) Prepare the entry to show expected sales returns and allowances.
b) Explain why it is important to prepare and include this entry in Olympia's financial statements.