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Sales return

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Sales return

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 9, 2014 at 8:58 am #208532
    saahath
    Member
    • Topics: 5
    • Replies: 4
    • ☆

    Hi Sir

    Can you explain the following question fromBPP revision kit mixed bank 7

    In October 2006 Utland sold some goods on sale or return terms for $2,500. Their cost to Utland was
    $1,500. The transaction has been treated as a credit sale in Utland’s financial statements for the year
    ended 31 October 2006. In November 2006 the customer accepted half of the goods and returned the
    other half in good condition.
    What adjustments, if any, should be made to the financial statements?

    A. Sales and receivables should be reduced by $2,500, and closing inventory increased by $1,500.

    B. Sales and receivables should be reduced by $1,250, and closing inventory increased by $750.

    C. Sales and receivables should be reduced by $2,500, with no adjustment to closing inventory.

    D. No adjustment is necessary.

    The correct answer is option A.

    but I get option B as the answer.

    if a credit customer return half of the goods, receivables will decrease by 1250.
    and inventory will increase by 750 know because the cost of the inventory is 1500.

    November 9, 2014 at 1:32 pm #208594
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The goods are on sale or return, and so until we hear from the customer there has been no sale and the goods still belong to us.

    The customer did not inform us until November. So at 31 October (our year end) there has been no sale and the goods belong to us 🙂

    November 11, 2014 at 6:08 am #208954
    saahath
    Member
    • Topics: 5
    • Replies: 4
    • ☆

    thanks sir.. I should be more careful when I read the questions 😀

    November 11, 2014 at 9:13 am #209023
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
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