Lopez Company reports unadjusted first-year merchandise sales of $132,000 and cost of merchandise sales of $33,000. a. Compute gross profit using the unadjusted numbers.

The company expects future returns and allowances equal to 2% of sales and 2% of cost of sales. b-1&2. Prepare the year-end adjusting entry to record the sales expected to be refunded and cost side of sales returns and allowances.