The Country Carver had sales totaling $14,800 during the month of June. Based on experience, company management expects 7 percent of the sales amount will be refunded to customers in the form of sales returns and allowances. The cost to The Country Carver of the goods that are estimated to be returned is $625.

Requirements

1. Journalize the necessary journal entries to record the estimated refunds on June 30. No explanations are required.

2. How are the Estimated Refund Liability and Estimated Inventory Returns reflected on The Country Carver’s financial statements for the month ended June 30?