Sports Illustrated (SI) sells magazines to various retail stores across the country. The contract with the stores allows them to return the magazines within 30 days of receipt if they are not sold to a consumer. All retail store customers have good credit ratings and receive the magazines onto their shelves f.o.b destination with payment due in 45 days after receipt. Past experience indicates that 15% of magazines are returned.

Required:

1. $1,000,000 of magazines are sold to retail stores on January 15^th 2020 and are received at the stores on January 21^st. SIs cost of these magazines is $300,000. Prepare all journal entries for the January transaction(s).
2. How much Gross Profit was recognized on the transaction you recorded in part (1) for January?
3. On February 1, 2020, customers returned $50,000 of magazines they purchased in January. Prepare the journal entry for this transaction.
4. How much Gross Profit was recorded in February on the transaction you recorded in part (3).