Accounting in Revenue Recognition

On March 10, 2017, Ayayai Company sold to Barr Hardware 210 tool sets at a price of $54 each (cost $30 per set) with terms of n/60, f.o.b. shipping point. Ayayai allows Barr to return any unused tool sets within 60 days of purchase. Ayayai estimates that (1) 10 sets will be returned, (2) the cost of recovering the products will be immaterial, and (3) the returned tools sets can be resold at a profit. On March 25, 2017, Barr returned 6 tool sets and received a credit to its account. Assume that instead of selling the tool sets on credit, that Ayayai sold them for cash.

Prepare journal entries for Ayayai to record (1) the sale on March 10, 2017, (2) the return on March 25, 2017, and (3) any adjusting entries required on March 31, 2017 (when Ayayai prepares financial statements). Ayayai believes the original estimate of returns is correct.

2) Indicate the income statement and balance sheet reporting by Ayayai at March 31, 2017, of the information related to the Barr sales transaction.