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botanic choice sells natural supplements to customers with an unconditional sales return if they are not satisfied. the sales returns extends 60 days. on february 10, 2020, a customer purchases $4,000 of products (cost $2,000). assuming that based on prior experience, estimated returns are 20%. the journal entry to record the expected sales return and cost of goods sold includes a

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Journal entry includes Debit of $800 to Sales Return

  • Let understand that we have to derive the amount of sales return allowance.

Data given are

Customer purchases = $4,000

Estimated returns = 20%

So, Sales return allowance = $4000 x 20%

Sales returns allowance =  $800

In conclusion, the estimated sales return is $800 and it will be debited as Sales Return Allowance.

Journal entry includes Credit of $400 to Cost of Goods Sold  

  • Let understand that we have to derive the amount of cost of goods sold.

Data given are

Cost = $2,000

Estimated returns = 20%

So, Cost of good sold = $2,000 x 20%

Cost of good sold = $400

In conclusion, the cost of goods sold is $400 and will be Credited to Cost of goods sold.

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