ProBuilder reports merchandise sales of $50,000 and cost of merchandise sales of $20,000 in its first year of operations ending June 30, 2016. It makes fiscal-year-end adjusting entries for estimated future returns and allowances equal to 2% of sales, or $1,000, and 2% of cost of sales, or $400.
a. Prepare the June 30, 2016, fiscal-year-end adjusting journal entry for future returns and allowances related to sales.
b. Prepare the June 30, 2016, fiscal-year-end adjusting journal entry for future returns and allowances related to cost of sales.