During its first year of operations, Drone Zone Corporation (DZC) bought goods from a manufacturer on account at a cost of $50,000. DZC returned $8,000 of this merchandise to the m... During its first year of operations, Drone Zone Corporation (DZC) bought goods from a manufacturer on account at a cost of $50,000. DZC returned $8,000 of this merchandise to the manufacturer for credit on its account. DZC then sold $38,000 of the remaining goods for cash at a selling price of $64,600. DZC records sales returns as they occur and then records estimated additional returns at year-end. During the year, customers returned goods and were issued gift cards equal in amount to the initial selling price of $6,800. These goods were in perfect condition, so they were put back into DZC’s inventory at their cost of $4,000. At year-end, DZC estimated $9,010 of current-year merchandise sales would be returned to DZC in the following year; DZC estimates $5,300 as its cost of this merchandise.
Understand the Problem
The question presents a scenario involving transactions of Drone Zone Corporation, detailing purchases, returns, sales, and estimated returns. We need to analyze these figures to determine the net effects on inventory and the financial standing of DZC towards the end of the year.
Answer
$5,300
DZC's end-of-year estimated cost of merchandise to be returned is $5,300.
Answer for screen readers
DZC's end-of-year estimated cost of merchandise to be returned is $5,300.
More Information
At the end of its first year, Drone Zone Corporation estimated that goods costing $5,300 would be returned following merchandise sales.
Tips
A common mistake is confusing the sales returns amount with the estimated cost of merchandise to be returned.
Sources
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