Assignment
Zell Company had sales of $1,800,000 and related cost of merchandise sold of $1,150,000 for its first year of operations ending December 31, 2016. Zell Company provides customers a refund for any returned or damaged merchandise. At the end of the year, Zell Company estimates that customers will request refunds for 1.5% of sales and estimates that merchandise costing $16,000 will be returned. Assume that on February 3, 2017 Anderson Co. returned merchandise with a selling price of $5,000 for a cash refund. The returned merchandise originally cost Zell Company $3,100.
Required:
(a) Journalize the adjusting entries on December 31, 2016 to record the expected customer returns.*
(b) Journalize the entries to record the returned merchandise and cash refund to Anderson Co.*
*Refer to the Chart of Accounts for exact wording of account titles.