Customer return and refund

On December 28, 20Y3, Silverman Enterprises sold $20,000 of merchandise to Beasley Co. with terms 2/10, n/30. The cost of the goods sold was $11,300. On December 31, 20Y3, Silverman prepared its adjusting entries, yearly financial statements, and closing entries. On January 3, 20Y4, Silverman Enterprises issued Beasley Co. a credit memo for returned merchandise. The invoice amount of the returned merchandise was $3,800 and the merchandise originally cost Silverman Enterprises $2,450.

a. Journalize the entries by Silverman Enterprises to record the December 28, 20Y3 sale, using the net method under a perpetual inventory system. If an amount box does not require an entry, leave it blank.

20Y3 Dec. 28	Accounts Receivable-Beasley Co.CashCustomer Refunds PayableEstimated Returns InventoryInterest ExpenseSalesAccounts Receivable-Beasley Co.	Accounts Receivable-Beasley Co.	Accounts Receivable-Beasley Co.
	Accounts Receivable-Beasley Co.CashCustomer Refunds PayableEstimated Returns InventoryInterest ExpenseSalesSales	Sales	Sales
20Y3 Dec. 28	CashCost of Goods SoldCustomer Refunds PayableEstimated Returns InventoryInterest ExpenseInventoryCost of Goods Sold	Cost of Goods Sold	Cost of Goods Sold
	CashCost of Goods SoldCustomer Refunds PayableEstimated Returns InventoryInterest ExpenseInventoryInventory	Inventory	Inventory

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Record the credit sale as well as the cost of the merchandise sold.

b. Journalize the entries by Silverman Enterprises to record the merchandise returned by Beasley Co. on January 3, 20Y4. If an amount box does not require an entry, leave it blank.

20Y4 Jan. 3	Accounts Receivable-Beasley Co.CashCost of Goods SoldCustomer Refunds PayableIncome tax ExpenseSalesCustomer Refunds Payable	Customer Refunds Payable	Customer Refunds Payable
	Accounts Receivable-Beasley Co.CashCost of Goods SoldCustomer Refunds PayableIncome tax ExpenseSalesAccounts Receivable-Beasley Co.	Accounts Receivable-Beasley Co.	Accounts Receivable-Beasley Co.
20Y4 Jan. 3	CashCost of Goods SoldEstimated Returns InventoryInterest IncomeInventorySalesInventory	Inventory	Inventory
	CashCost of Goods SoldEstimated Returns InventoryInterest IncomeInventorySalesEstimated Returns Inventory	Estimated Returns Inventory	Estimated Returns Inventory

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To record a customer refund, a liability account to estimate refunds that will be paid to customers is used. Depending on whether the customer has paid for the merchandise, a cash refund or credit memo will be issued.

c. Journalize the entry to record the receipt of the amount due by Beasley Co. on January 7, 20Y4. If an amount box does not require an entry, leave it blank.

20Y4 Jan. 7	Accounts Receivable-Beasley CoCashCustomer Refunds PayableEstimated Returns InventoryInventorySalesCash	Cash	Cash
	Accounts Receivable-Beasley Co.Cost of Goods SoldCustomer Refunds PayableEstimated Returns InventoryInventorySalesAccounts Receivable-Beasley Co.	Accounts Receivable-Beasley Co.	Accounts Receivable-Beasley Co.