Prepare the journal entries for the return and collection

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Question - Islim Limited manufactures faux fur coats of all types and sizes that are sold to specialty stores throughout Canada. Sales to retailers provide for payment within 60 days of delivery and the retailer may return a maximum of 25% of an order at the retailer's expense for the freight. Past experience indicates that the normal return rate is 14%. Islim has a perpetual inventory system and follows IFRS.

1) On July 1, 2020, Islim shipped faux furs invoiced at $2 million (cost $1.1 million). Prepare the journal entry to record this transaction.

2) On October 3, 2020, $220,000 of the invoiced July sales were returned according to the return policy, and the remaining balances on account were paid. Prepare the journal entries for the return and collection.

Reference no: EM133104314

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