During 2021, its first year of operations, Hollis Industries recorded sales of $10,900,000 and experienced returns of $650,000. Cost of goods sold totaled $6,540,000 (60% of sales). The company estimates that 7% of all sales will be returned.
Prepare the year-end adjusting journal entries to account for anticipated sales returns, assuming that all sales are made on credit and all accounts receivable are outstanding. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)
- Record the anticipated sales returns.
- Record estimated return of inventory.