Chico Company allows its customers to return merchandise within 30 days of purchase.

• At December 31, the end of its first year of operations, Chico estimates future-period merchandise returns of $66,000 (cost of $25,500) related to its current year sales.
• A few days later, on January 3, a customer returns merchandise with a selling price of $2,300 for a cash refund the returned merchandise cost $810 and is returned to inventory as it is not defective.

a. Prepare the December 31 year-end adjusting journal entry for estimated future sales returns and allowances (revenue side). b. Prepare the December 31 year-end adjusting journal entry for estimated future inventory returns and allowances (cost side). c. Prepare the January 3 journal entries to record the merchandise returned.