Prepare the journal entries to record the preceding sale

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Problem - Returns and Allowances Towbin Products sells merchandise on credit for $7,000 on December 1, 2019. The merchandise cost Towbin $4,900 (70% of the selling price). Towbin estimates that returns and allowances will amount to 4% of sales. On December 22, 2019, a customer returns for credit merchandise originally sold on December 1 for $200.

Required -

1. Assume Towbin uses a periodic inventory system. Prepare the journal entries to record the preceding sale and the return of merchandise.

2. Assume that Towbin uses a perpetual inventory system. Prepare the journal entries to record the preceding sale and the return of merchandise.

3. Consider your answer to Requirement 1. How would the preceding information be reflected on Towbin's December 31, 2019, financial statements?

4. What is the conceptual advantage of recording sales returns and allowances as a reduction of revenue?

Reference no: EM132882155

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