On March 10, 2020, Sunland Company sold to Barr Hardware 200 toolsets at a price of $49 each (cost $32 per set) with terms of n/60, f. o.b. shipping point. Sunland allows Barr to return any unused toolsets within 60 days of purchase. Sunland estimates that (1) 10 sets will be returned, (2) the cost of recovering the products will be immaterial, and (3) the returned tools sets can be resold at a profit. On March 25, 2020, Barr returned 5 toolsets and received a credit to its account.
Required:
Prepare journal entries for Steele to record (1) the sale on March 10, 2020, (2) the return on March 25, 2017, and (3) any adjusting entries required on March 31, 2020 (when Steele prepares financial statements). Steele believes the original estimate of returns is correct.