Question

ProBuilder has the following June 30 fiscal-year-end unadjusted balances: Allowance for Sales Discounts, $0; and Accounts Receivable, $11,600. Of the $11,600 of receivables, $2,800 are within a 3% discount period, meaning that it expects buyers to take $84 in future discounts arising from this period’s sales.

a. Prepare the June 30 fiscal-year-end adjusting journal entry for future sales discounts.

b. Assume the same facts above and that there is a $9 fiscal-year-end unadjusted credit balance in the Allowance for Sales Discounts. Prepare the June 30 fiscal-year-end adjusting journal entry for future sales discounts.

ProBuilder reports merchandise sales of $66,000 and cost of merchandise sales of $13,200 in its first year of operations ending June 30. It makes fiscal-year-end adjusting entries for estimated future returns and allowances equal to 4% of sales, or $2,640, and 4% of cost of sales, or $528.

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

Record the expected sales to be refunded. Record the expected cost of returns.

Answer 1

Ans a	Adjusting Journal entry
Date	Account Title	Dr $	Cr $
June 30.	Sales Discount	84
	Allowance for Sales Discount		84
Ans b.	Adjusting Journal entry
Date	Account Title	Dr $	Cr $
June 30.	Sales Discount	75
	Allowance for Sales Discount		75
Ans a	Second part
Date	Account Title	Dr $	Cr $
June 30.	Sales Discount	2,640
	Allowance for Sales Discount		2,640
	Inventory -Allowance for return	528
	Cost of Sales -Allowance for return		528
Ans b
Date	Account Title	Dr $	Cr $
June 30.	Sales Discount	2,631
	Allowance for Sales Discount		2,631
	Inventory -Allowance for return	528
	Cost of Sales -Allowance for return		528