McLaughlin Novelty Corp. developed an unusual product, electric clip-on eyeglass wipers. McLaughlin felt the product would appeal to hikers, joggers, and cyclists who engaged in their sports in rainy climates. Because retail establishments were skeptical about the market appeal of the product, McLaughlin sold the product with a declining unconditional right of return for up to ten months, with 10% of the right-of-return amount of the purchase expiring every month for ten months. Thus, after the retailer had the product for one month, only 90% could be returned. After two months, only 80% could be returned, and after ten months, the right of return was fully expired. Assume that all the values provided for "returns" in the question data meet the terms set for right of return by McLaughlin. McLaughlin had no basis for estimating the amount of returns. Consistent with the terms McLaughlin offered its customers, all retailers paid cash when purchasing the clip-on-eyeglass wipers but received cash refunds if goods were returned. McLaughlin had its first sales of the product in September 20X5. Sales for the remainder of the year, and returns prior to 31 December 20X5, were as follows: Month of Sale September October November December Totals Units Sales Monthly Units Sold Price Sales Returned 10,900 $12 $130,800 2,700 12,900 12 154,800 1,000 15,900 14 222,600 1,000 11,700 14 163,800 51,400 $672,000 4,700 Each unit of product costs McLaughlin $7 to produce. Required: 1. Show the journal entries to record the four months of sales transactions, including the deferral of gross margin. Prepare one summary entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet Record the returns. Note: Enter debits before credits. Transaction General Journal Debit Credit McLaughlin Novelty Corp. developed an unusual product, electric clip-on eyeglass wipers. McLaughlin felt the product would appeal to hikers, joggers, and cyclists who engaged in their sports in rainy climates. Because retail establishments were skeptical about the market appeal of the product, McLaughlin sold the product with a declining unconditional right of return for up to ten months, with 10% of the right-of-return amount of the purchase expiring every month for ten months. Thus, after the retailer had the product for one month, only 90% could be returned. After two months, only 80% could be returned, and after ten months, the right of return was fully expired. Assume that all the values provided for "returns" in the question data meet the terms set for right of return by McLaughlin. McLaughlin had no basis for estimating the amount of returns. Consistent with the terms McLaughlin offered its customers, all retailers paid cash when purchasing the clip-on-eyeglass wipers but received cash refunds if goods were returned. McLaughlin had its first sales of the product in September 20X5. Sales for the remainder of the year, and returns prior to 31 December 20X5, were as follows: Month of Sale September October November December Totals Units Sales Monthly Units Sold Price Sales Returned 10,900 $12 $130,800 2,700 12,900 12 154,800 1,000 15,900 14 222,600 1,000 11,700 14 163,800 51,400 $672,000 4,700 Each unit of product costs McLaughlin $7 to produce. Required: 1. Show the journal entries to record the four months of sales transactions, including the deferral of gross margin. Prepare one summary entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet Record the returns. Note: Enter debits before credits. Transaction General Journal Debit Credit
