Accounting for Refunds and Returns
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Questions and Answers

What is the purpose of the first adjusting entry?

  • To decrease the Customer Refunds Payable
  • To increase the Cost of Merchandise Sold
  • To record the sale of merchandise in 2021
  • To recognize the estimated refunds that may occur in 2021 (correct)

    • What is the effect of the second adjusting entry on the Cost of Merchandise Sold?

  • It has no effect on the Cost of Merchandise Sold
  • It eliminates the Cost of Merchandise Sold
  • It increases the Cost of Merchandise Sold
  • It decreases the Cost of Merchandise Sold (correct)

    • What is the initial balance of Customer Refunds Payable before the adjusting entries?

  • $800 (correct)
  • $715,409
  • $7,000
  • $5,000

    • What is the name of the account that is debited instead of Merchandise Inventory for the estimated returns?

    <p>Estimated Returns Inventory</p> Signup and view all the answers

    Where is Estimated Returns Inventory reported on the balance sheet?

    <p>Right after Merchandise Inventory</p> Signup and view all the answers

    What is the total amount of estimated refunds that may occur in 2021?

    <p>$7,154</p> Signup and view all the answers

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