Lopez Company reports unadjusted first$-$year merchandise sales of $$100,000$ and cost of merchandise sales of $$30,000.$

a$.$ Compute gross profit using the unadjusted numbers above.

b$-1.$&$2.$ The company expects future returns and allowances equal to $5\%$ of sales and $5\%$ of cost of sales. Prepare the year$-$end

adjusting entry to record the sales expected to be refunded and cost side of sales returns and allowances.

b$-3.$ Recompute gross profit using the adjusted numbers from parts $1$ and $2.$

c$.$ Is Sales Refund Payable an asset, liability, or equity account?

d$.$ Is Inventory Returns Estimated an asset, liability, or equity account?

Complete this question by entering your answers in the tabs below.

Req A

Req $B1$ and $B2$

Req C and D

Compute gross profit using the unadjusted numbers above.