Business, 19.10.2021 14:00, dianactorres
On October 2, 2020, Novak Company sold $6,520 of its elite camping gear (with a cost of $3,240) to Lynch Outfitters. As part of the sales agreement, Novak includes a provision that if Lynch is dissatisfied with the product, Novak will grant an allowance on the sales price or agree to take the product back (although returns are rare, given the long-term relationship between Novak and Lynch). Novak expects total allowances to Lynch to be $800. On October 16, 2020, Novak grants an allowance of $390 to Lynch because the color for some of the items delivered was a bit different than what appeared in the catalog.
Instructions
(a) Prepare journal entries for Laplante to record (1) the sale on October 2, 2017, (2) the granting of the allowance on October 16, 2017, and, (c) any adjusting required on October 31, 2017 (when Laplante prepares financial statements). Laplante now estimates additional allowances of $250 will be granted to Lynch in the future.
(b) Indicate the income statement and balance sheet reporting by Laplante at October 31, 2017, of the information related to the Lynch transaction.
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On October 2, 2020, Novak Company sold $6,520 of its elite camping gear (with a cost of $3,240) to L...
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