Organic Growth Company is presently selling new products. To stimulate interest, it has decided to grant to five of its largest customers the unconditional right of return to these products if not fully satisfied. Organic Growth allows these customers to return these products within four months for full cash refunds. On January 1, 2019, Organic Growth sells products to these customers for $1,500,000 cash. The cost of sold products is $750,000 for Organic Growth. In the meanwhile, Organic Growth estimates that the probability of returns is 20% and it uses the expected value method (probability-weighted amount) to predict the revenues.

On April 30, 2019 (the last day valid for product returns), one customer actually returns the products with a selling price of $100,000. There are no product returns in any other days during this period. Other customers also confirm that they will not return products.

Required: (a) Prepare journal entries on January 1, 2019. [3 marks]

(b) Prepare journal entries on April 30, 2019. [2 marks]