Adjustment for Merchandise Inventory Using T Accounts: Periodic Inventory System with Sales Returns and Allowances

Sam Edwards owns a business called Sams Stuff. A physical count determined his ending inventory as of December 31, 20-- was $73,000. Based on past experience, Sam estimates that $4,400 of sales from this year will be returned next year. The cost of the merchandise expected to be returned is $2,800. Using the partial Trial Balance provided below, set up T accounts for Merchandise Inventory, Estimated Returns Inventory, Customer Refunds Payable, Sales Returns and Allowances, and Income Summary and prepare the year-end adjustments for Merchandise Inventory and related accounts.

	TRIAL BALANCE (PARTIAL)
	DEBIT	CREDIT
Merchandise Inventory	62,000.00
Estimated Returns Inventory	2,500.00
Customer Refunds Payable		4,200.00
Sales Returns and Allowances	19,000.00
Income Summary

For grading purposes use the labels shown and enter transactions in alphabetical order.

TB Trial balance (beginning balance) ATB Adjusted trial balance (ending balance) (a) Remove the beginning balance in merchandise inventory. (b) Add the new balance per the physical count. (c) Adjust the customer refunds balance to the new estimate of next year returns (use one adjusting entry). (d) Remove the beginnning balance in estimated returns inventory. (e) Add the new balance per the estimate of merchandise expected to be returned.

Assets
Merchandise Inventory
(a)(b)(c)(d)(e)TBATB	fill in the blank 2	(a)(b)(c)(d)(e)TBATB	fill in the blank 4
(a)(b)(c)(d)(e)TBATB	fill in the blank 6
(a)(b)(c)(d)(e)TBATB	fill in the blank 8

Estimated Returns Inventory
(a)(b)(c)(d)(e)TBATB	fill in the blank 10	(a)(b)(c)(d)(e)TBATB	fill in the blank 12
(a)(b)(c)(d)(e)TBATB	fill in the blank 14
(a)(b)(c)(d)(e)TBATB	fill in the blank 16

Liabilities
Customer Refunds Payable
		(a)(b)(c)(d)(e)TBATB	fill in the blank 18
		(a)(b)(c)(d)(e)TBATB	fill in the blank 20
		(a)(b)(c)(d)(e)TBATB	fill in the blank 22

Owner's Equity
Income Summary
(a)(b)(c)(d)(e)TBATB	fill in the blank 24	(a)(b)(c)(d)(e)TBATB	fill in the blank 26
(a)(b)(c)(d)(e)TBATB	fill in the blank 28	(a)(b)(c)(d)(e)TBATB	fill in the blank 30

Revenues
Sales

Sales Returns and Allowances
(a)(b)(c)(d)(e)TBATB	fill in the blank 32
(a)(b)(c)(d)(e)TBATB	fill in the blank 34
(a)(b)(c)(d)(e)TBATB	fill in the blank 36