Adjusting entry for customer refunds, allowances, and returns Instructions Chart of Accounts Journal Instructions Statz Company had sales of $1,900,000 and related cost of goods sold of $1,000,000 for its first year of operations ending December 31, 20Y1. Statz provides customers a refund for any returned or damaged merchandise. At the end of 20Y1, Statz Company estimates that customers will request refunds for 1.8% of sales and estimates that merchandise costing $11,000 will be returned. Assume that on February 3, 2012, Buck Co. returned merchandise with an invoice amount of $5,300 for a cash refund. The returned merchandise originally cost Statz Company $3,100. A. Journalize the adjusting entries on December 31, 20Y1, to record the expected customer returns.* B. Journalize the entries to record the returned merchandise and cash refund to Buck Co. on February 3, 20Y2.* *Refer to the Chart of Accounts for exact wording of account titles. Chart of Accounts CHART OF ACCOUNTS Statz Company General Ledger ASSETS 110 Cash 120 Accounts Receivable 125 Notes Receivable 130 Inventory 131 Estimated Returns Inventory 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 180 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 216 Salaries Payable 218 Sales Tax Payable 219 Customer Refunds Payable 220 Unearned Rent 221 Notes Payable REVENUE 410 Sales 610 Rent Revenue EXPENSES 510 Cost of Goods Sold 521 Delivery Expense 522 Advertising Expense 524 Depreciation Expense-Store Equipment 525 Depreciation Expense-Office Equipment 526 Salaries Expense 531 Rent Expense 533 Insurance Expense 534 Store Supplies Expense 535 Office Supplies Expense 536 Credit Card Expense 539 Miscellaneous Expense 710 Interest Expense EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends Journal A. Journalize the adjusting entries on December 31 to record the expected customer returns. Refer to the Chart of Accounts for exact wording of account titles. DATE DESCRIPTION 1 2 3 4 JOURNAL PAGE 1 ACCOUNTING EQUATION LIABILITIES EQUITY POST. REF. DEBIT CREDIT ASSETS B. Journalize the entries to record the returned merchandise and cash refund to Buck Co. on February 3. Refer to the Chart of Accounts for exact wording of account titles. DATE DESCRIPTION 1 2 3 JOURNAL PAGE 1 ACCOUNTING EQUATION LIABILITIES EQUITY POST. REF. DEBIT CREDIT ASSETS X