Hahn Flooring Company uses a perpetual inventory system. Journalize the December 31 adjusting entries based upon the following:

A. Sales returns of $125,000 and merchandise returns of $80,000 are estimated for the current year's sales.

B. The inventory account has a balance of $1,333,150, while physical inventory indicates that $1,309,900 of merchandise is on hand.

Journalize the December 31 adjusting entries based on the above transactions. Assume that the inventory shrinkage is a normal amount.

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Business

Myla Ewing

7 May, 16:38

Hahn Flooring Company uses a perpetual inventory system. Journalize the December 31 adjusting entries based upon the following:

A. Sales returns of $125,000 and merchandise returns of $80,000 are estimated for the current year's sales.

B. The inventory account has a balance of $1,333,150, while physical inventory indicates that $1,309,900 of merchandise is on hand.

Journalize the December 31 adjusting entries based on the above transactions. Assume that the inventory shrinkage is a normal amount.

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Kelvin Beard · Answer 1

Date Accounts titles Debit Credit

A)

Dec. 31 Sales returns and allowances $125,000

Accounts receivable $125,000

Merchandise Inventory $80,000

Cost of Good sold $80,000

B)

Dec. 31 Cost of Good sold $23,250

Merchandise Inventory $23,250

Note: Inventory Shrinkage = Account balance of inventory - Physical inventory on hand

= $1,333,150 - $1,309,900

= $23,250