During 2016, its first year of operations, Hollis Industries recorded sales of $11,200,000 and experienced returns of $780,000. Cost of goods sold totaled $7,840,000 (70% of sales). The company estimates that 8% of all sales will be returned.

Prepare the year-end adjusting journal entries to account for anticipated sales returns under the assumption that all sales are made for cash (no accounts receivable are outstanding).

1.Record the anticipated sales returns.

2.Record estimated return of inventory.