Brief Exercise 18-13

On July 10, 2017, Carla Music sold CDs to retailers on account and recorded sales revenue of $657,000 (cost $538,740). Carla grants the right to return CDs that do not sell in 3 months following delivery. Past experience indicates that the normal return rate is 15%. By October 11, 2017, retailers returned CDs to Carla and were granted credit of $84,200.

Prepare Carlas journal entries to record (a) the sale on July 10, 2017, and (b) $84,200 of returns on October 11, 2017, and on October 31, 2017. Assume that Carla prepares financial statement on October 31, 2017.

No. Date Account Titles and Explanation Debit Credit (a) Jul. 10, 2017 Accounts Receivable T 657,000 T T T 657,000 Sales Revenue (To record sales T 538,740 T Cost of Goods Sold 538,740 Inventory (To record cost of goods sold) (b) oct. 11, 201. Sales Returns and Allowan T 84,200 T T T 84,200 Accounts Receivable (To record sales returns) 69,044 Cost of Goods Sold 69,044 Accounts Receivable (To record cost of goods returned) Oct. 31, 2017 TRealized Gross Profit 103,104 t t Accounts Receivable 103,104