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In May, Sunshine sold inventories on sale or return terms for €4,000. The cost to Sunshine was €1,600. The transaction has been recorded as a credit sale in Sunshine’s financial statements for the year ended 31 May 2013. In the past, some customers have returned inventories under this arrangement.
In June 2013, the customer accepted half of the inventories and returned the other half in good condition.
What adjustments, if any, should be made to the financial statements for the period ended 31 May 2013?(A) No adjustments required.
(b) Sales and receivables should be reduced by €4,000 and closing inventories increased by €1,600.
(c) No adjustments to sales or receivables but closing inventories should be increased by €800.The answer is (B). But if only half the goods are returned shouldn’t only have of the revenue by subtracted? Not all of it!? (4,000)
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