Novelty Inc. developed a new product in 2020 and its financial results follow. To increase acceptance by retailers, Novelty sold the product to retailers with an unconditional right of return, which expires on February 1, 2021. Novelty estimates returns to be 30%. All sales are on credit. Novelty uses the perpetual inventory system

Sales Value Cost Value Sales in 2020 $144,000 $96,000 Returns of 2020 sales in 2020 9,600 6,400 Returns of 2020 sales in January 2021 12,000 8,000 a. Prepare the 2020 sales journal entries for Novelty Inc. b. Record actual returns in 2020. Assume actual returns are on credit. C. Record estimated returns on December 31, 2020. d. Record actual returns in 2021(for January) and any required adjusting entries. Assume actual returns are on credit. a. 2020 Sales b. 2020 actual returns c. 2020 estimated returns d. 2021 actual returns a. Prepare the 2020 sales journal entries for Novelty Inc. Account Name Dr. Cr. Accounts Receivable 144,000 Sales Revenue 0 144,000 To record sales Cost of Goods Sold 96,000 Inventory 96,000 To record cost of sales b. Record actual returns in 2020. Assume actual returns are on credit. Account Name Dr. Cr. Sales Returns 9,600 Accounts Receivable 0 9,600 To record actual sales returns Inventory 6,400 0 Cost of Goods Sold 6,400 To record cost of actual sales returns Dr. c. Record estimated returns on December 31, 2020. Account Name Cr. Sales Returns 12,000 Refund Liability o 12.000 To record estimated sales returns Inventory-Estimated Returns 8,000 Cost of Goods Sold 8,000 To record cost of estimated sales returns Dr. Cr. d. Record actual returns in 2021(for January) and any required adjusting entries. Assume actual returns are on credit. Account Name Sales Returns 12,000 Accounts Receivable 0 12,000 To record sales returns Inventory 8,000 Cost of Goods Sold 8,000 To record cost of sales returns 0 To adjust sales returns for refund liability To adjust cost of goods sold forrefund liability