At December 31, 2015, EarthWear has $5,890,000 in a liability account labeled Reserve for returns. The footnotes to the financial statements contain the following policy: At the time of sale, the company provides a reserve equal to the gross profit on projected merchandise returns, based on prior returns experience. The entity has indicated that returns for sales that are six months old are negligible, and gross profit percentage for the year is 42.5 percent. The entity has also provided the following information on sales for the last six months of the year:\