Topic: New Revenue Recognition Standard Sales Returns and Allowances

4. During 2016, Radek Technologies sold merchandise for a total of $1,200,000. The cost of merchandise to Radek was $900,000. Radek offers credit terms of 1/15, n/30 to encourage early payment. At year-end, there are $150,000 of sales still eligible for the 1% discount. Radek believes that all of the companies will pay within the discount period to receive the 1% discount. In addition, Radek allows a 60 day return period for the merchandise it sells. At year-end, Radek estimates there are $450,000 of sales (with a cost of $337,500 to Radek) that are still within the 60-day return period. From past experience, Radek believes that 10% of this merchandise will be returned. Assume Radeks fiscal year is December 31.

Prepare the period-end adjusting journal entries needed for Radek Technologies to comply with the new revenue recognition standard.