New Revenue Recognition Standard-Adjusting Journal Entries SourceOne sold $4,000,000 of merchandise on account during the current year. The cost for this merchandise to SourceOne was $1,400,000. To encourage early payment from its customers, SourceOne offers credit terms of 2/10, n/30. At year-end, SourceOne recognizes that there are $375,000 of sales on account still eligible for the 2 percent discount. SourceOne believes that all customers will pay within the discount period to receive this discount. In addition, SourceOne allows a 60-day return privilege for the merchandise it sells. At year-end, SourceOne estimates there remain $700,000 of sales (with a cost to SourceOne of $245,000) that are still within the 60-day return period and that, based on past experience, 4 percent of this merchandise is expected to be returned Prepare the period-end adjusting journal entries needed for SourceOne to comply with the new revenue recognition standard. Assume SourceOne's fiscal year-end is December 31 General Journal Description Debit Credit Sales discounts 9,800 X Allowance for sales discounts 4,000,000 X To record estimated sales discounts. Sales returns and allowances 9,800 X Sales refunds payable 0 1,400,000 X To record estimated return of sales still eligible for return. Estimated inventory return 7,500 Cost of goods sold 7,500X To record the cost of merchandise sold for sales still eligible for return