Reference no: EM132597463

One type of contra account is the Sales Returns account. This is the account Annabelle and Sarah work with to record transactions resulting from For Rover's Sake issuing refunds.

The reason for the refund doesn't really matter--in other words, the accounting process isn't going to change if a dog's harness is too big or if the customer didn't think it matched the interior of her car after all.

Question 1: What matters for Annabelle and Sarah is they handle the amount in the right way.

Question 2: Sales returns are recorded as a debit to the Sales Returns account (Scott, 2018)...but if something is recorded as a debit somewhere, it has to be recorded as a credit somewhere else, right?

Question 3: In this case, it's Accounts Receivable. This is because Sales Returns are deducted from Gross Sales. What remains is the Net Sales figure.

Now it's up to you. For Rover's Sake processed the following refunds in the current accounting cycle:

1. $132.87 for a harness, dog crate, and food dishes
2. $23.99 for a bag of gourmet dog food
3. $9.56 for a chew toy and a bag of dog treats
4. $84.97 for a harness and leash
5. $55.49 for a dog carrier

Question 4: For Rover's Sake's net sales were $7,649.32 for this accounting cycle. What were the gross sales for this accounting cycle? Round to the nearest dollar.

Question 5: Describe how the gross sales you calculated would be useful in determining how much debt the company can handle and stay profitable.