Question

On March 10, 2020, Steele Company sold to Barr Hardware 200 tool sets at a price of $50 each (cost $30 per set) with terms of n/60, f.o.b. shipping point. Steele allows Barr to return any unused tool sets within 60 days of purchase. Steele estimates that (1) 10 sets will be returned, (2) the cost of recovering the products will be immaterial, and (3) the returned tools sets can be resold at a profit. On March 25, 2020, Barr returned 6 tool sets and received a credit to its account.

Answer 1

Answer:

account receivables        10,000 debit

             sales                                   10,000 credit

--to record sales to Barr hardware--

COGS                                   6,000 debit

        Inventory                                 6,000 credit

--to record COGS to Barr hardware--

Sales Return               300 debit

       Accounts Receivables           300 credit

Inventory                     180 debit

       COGS                                      180 credit

--to record for Barr returned goods--

Explanation:

200 tool sets x $ 50 = $ 10,000 sales revenue

COGS: 200 tool sets x $ 30 = 6,000

sales returns : 6 x 50 = 300

inventory recovery: 6 x 30 = 180

As we assume the tool sets can be resold are recover to inventory.