Rusty Hardware makes only cash sales. It began 2018 with a credit balance of $32,000 in the refund liability account. Sales during 2018 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $28,000 to their accounts.
-What is the balance in the allowance for sales returns account at the end of 2018?

Question

Rusty Hardware makes only cash sales. It began 2018 with a credit balance of $32,000 in the refund liability account. Sales during 2018 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2018, customers returned merchandise for credit of $28,000 to their accounts. 
-What is the balance in the allowance for sales returns account at the end of 2018?

Quizplus · Accepted Answer

$32,000 + 36,000($600,000 × 6%) - 28,000 = $40,000

Rusty Hardware Makes Only Cash Sales