Problem
Etona Inc. sells 120 widgets to Citex Inc. for cash for $150 each. Etona Inc. allows its customers to return any unused product within 30 days and receive a full refund. The cost of each widget is $100.00. Based on historical experience Etona Inc. estimates that:
• 95% will be retained by Citex Inc.
• The cost of recovering the widgets will be immaterial.
• The returned products will be resold at a profit.
Task
Prepare the 4 journal entries for Etona Inc. to record this sale and the return of 5 widgets.