Exercise 18-21

Marigold Publishing Co. publishes college textbooks that are sold to bookstores on the following terms. Each title has a fixed wholesale price, terms f.o.b. shipping point, and payment is due 60 days after shipment. The retailer may return a maximum of 30% of an order at the retailers expense. Sales are made only to retailers who have good credit ratings. Past experience indicates that the normal return rate is 11%. The costs of recovery are expected to be immaterial, and the textbooks are expected to be resold at a profit.

On July 1, 2017, Marigold shipped books invoiced at $12,000,000 (cost $9,600,000). Prepare the journal entry to record this transaction.

On October 3, 2017, $1,200,000 of the invoiced July sales were returned according to the return policy, and the remaining $10,800,000 was paid. Prepare the journal entries for the return and payment.

Account Titles and Explanation (To recognize revenue.) (To record cost of goods sold.) Debit Credit