For the year ended december 31, 2019, davidson mart had sales of $800,000 and cost of goods sold of $600,000. davidson estimates that approximately 2% of the merchandise sold will be returned. the adjusting journal entry on december 31, 2019, would include
a) credit to refunds payable for $40,000
b) debit to cost of goods sold for $30,000
c) debit to sales revenue for $10,000
d) credit to estimated returns inventory for $ 3

A) credit to Refunds Payable for $40,000

Explanation:

ed merchandise will increase our inventory and lower the cost of goods sold.

Also, it will decrease our net sales.

However, it is important to notice we are doing a provision, the returned didn't occur yet.

800,000 x 2% = 40,000 expected refund

sales returns and allowance 40,000

    refund liability   40,000

When the customer returns good we will do:

refund liability  debit

cash credit

when the goods were already paid

or

refund liability debit

account receivable credit

when not paid, and simply deducted from the customer accounts.

in terms of experimental research, mcdonald’s charging different prices in the two cities relates to

answer; erp systems;