Elec-Air is selling a new model of high-efficiency air conditioner. To stimulate interest, Elec-Air is granting certain large customers the unconditional right to return these air conditioners if not fully satisfied. The right of return extends for six months. Elec-Air estimates returns of 9%. Elec-Air sells these air conditioners on account for $19,100,000(cost $10,505,000) on April 2, 2017. Customers are required to pay the full amount due by June 15, 2017.

b. Assume that on May 15, 2017, one customer returns air conditioners that it purchased from Elec-Air for $400,000. Prepare the journal entry to record this transaction and the receipt of cash from customers on June 15, 2017. (Use the net method to record sales.)

c. Assume Elec-Air prepares financial statements quarterly. Prepare the necessary entries (if any) to adjust Elec-Airs financial results for the above transactions on June 30, 2017, assuming remaining expected returns of $1,319,000. (Use the net method to record sales.)