QS 4-20B Recording estimates of future returns LO P6 ProBuilder reports merchandise sales of $92,000 and cost of merchandise sales of $32,200 in its first year of operations ending June 30. It makes fiscal-year-end adjusting entries for estimated future returns and allowances equal to 2% of sales, or $1,840, and 2% of cost of sales, or $644. a. & b. Prepare the June 30 fiscal-year-end adjusting journal entry for future returns and allowances related to sales and cost of sales.

a. June 30

Dr Sales returns and allowances $1,840

Cr Sales refund payable $1,840

b. June 30

Dr Inventory returns estimated $640

Cr Cost of goods sold $640

Explanation:

a. & b. Preparation of the June 30 fiscal-year-end adjusting journal entry for future returns and allowances related to sales and cost of sales.

a. June 30

Dr Sales returns and allowances $1,840

Cr Sales refund payable $1,840

($92,000 × 2%)

(To record future returns and allowances related to sales)

b. June 30

Dr Inventory returns estimated $640

Cr Cost of goods sold $640

($32,000 × 2%)

(To record cost of sales)

a.To record expected sales to be refunded ($92,000 × 2%)

To record expected sales to be refunded= $1,840

b. To record expected cost of returns= ($32,000 × 2%)

To record expected cost of returns = $640

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