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9 December, 07:23

Lavender Corporation sells 100 jars of essential oil to Bed, Bath, and Relax on December 1, 20X5, for $10 each. Lavender offers a right to return the product for any reason. Based on past sales, Lavender expects Bed, Bath, and Relax to return 5 jars. What adjusting journal entry, if any, should Lavender record on December 31, 20X5, to reflect Bed, Bath, and Relax's right of return

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  1. 9 December, 09:12
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    Sales Returned and Allowances $50

    Allowance for Sales Return and Allowances $50

    Lavender expects 5 jars at $10 each ($50 total) to be returned.

    Explanation:

    Lavender Corporation sells 100 jars of essential oil to Bed, Bath, and Relax on December 1, 20X5, for $10 each. Lavender offers a right to return the product for any reason. Based on past sales, Lavender expects Bed, Bath, and Relax to return 5 jars

    Using the above stated information we get the given data : -

    Sales Returned and Allowances $50

    Allowance for Sales Return and Allowances $50

    Lavender expects 5 jars at $10 each ($50 total) to be returned.

    The adjusting journal entry on December 31 reflects

    The right of return by debiting Sales Returns and Allowances (a contra-revenue account) and Crediting Allowance for Sales Returns and Allowances (a contra-asset account to Accounts Receivable).
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