Prepare the journal entries to record sales

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Question - YG Company recorded sales of $3,600,000 for the year ended December 31, 2020. During 2020, the company recorded actual returns and allowances of $45,000. As of December 31, 2020, YG estimates sales returns at 3% of current year sales. It is the company's policy to provide refunds on account. YG uses a perpetual inventory system and records estimated returns at the end of the period. The balance in Refund Liability is $32,400 and the balance in Inventory-Estimated Returns is $12,960 on January 1, 2020.

Required -

a. Prepare the journal entries to record sales in 2020 assuming all sales are on account. Cost of goods sold is 40% of the selling price.

b. Prepare the journal entries to record actual returns in 2020.

c. Prepare the adjusting entries, if any, related to estimated returns on December 31, 2020.

Reference no: EM133062936

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