During its first year of operations, Drone Zone Corporation (DZC) bought goods from a manufacturer on account at a cost of $55,0

Question

1 month ago

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During its first year of operations, Drone Zone Corporation (DZC) bought goods from a manufacturer on account at a cost of $55,0

00. DZC returned $8,500 of this merchandise to the manufacturer for credit on its account. DZC then sold $43,000 of the remaining goods at a selling price of $69,600. DZC records sales returns as they occur and then records estimated additional returns at year-end. During the year, customers returned goods that had been sold at a price of $7,300. These goods were in perfect condition, so they were put back into DZC’s inventory at their cost of $4,500. At year-end, DZC estimated $9,510 of current year merchandise sales would be returned to DZC in the following year; DZC estimates $5,800 as its cost of this merchandise.
Required:
Prepare journal entries to record DZC's transactions and estimates, assuming DZC uses a perpetual inventory system.

Business

1 answer:

Nady [3.6K] · Answer 1 · 2026-04-03T23:21:47+03:00

Response:

Clarification:

Journal Entries

Event Account Title and Explanation Debit Credit

1 Inventory (or merchandise) $ 55,000

Accounts Payable $ 55,000

To document the purchase on account

2 Accounts Payable $ 8,500

Inventory (or merchandise) $ 8,500

To record the return of merchandise

3. Cash ( or Accounts receivable) $69,600

Sales Revenue $ 69,600

To log sales revenue

4. Cost of goods sold $43,000

Inventory (or merchandise inventory) $43,000

To document the cost of goods sold

5. Sales return and allowances $7,300

Cash (or Accounts receivable) $7,300

To record the sales return

6. Inventory (or merchandise Inventory) $ 4,500

Cost of goods sold $4,500

To document the reversal of COGS (Cost of goods sold)

7. Sales return and allowances $ 9510

Allowances for sales return $9510

To record the allowances for the anticipated return

8. Inventory - Estimated Return $5,800

Cost of goods $5,800

To document the allowances for the estimated return of the cost of goods sold