Regarding the End of Period Adjusting Entries to Record Estimated

question 80

Multiple Choice

Regarding the end of period adjusting entries to record estimated sales returns,which of the following statements is correct? (Assume the perpetual inventory system is used.)

• A) Companies use data published by the FASB to estimate the amount of sales returns related to the sales of similar companies.
• B) It is acceptable to prepare a single adjusting entry which debits Estimated Returns Inventory and credits Refunds Payable.
• C) Both Sales Revenue and Cost of Goods Sold accounts are decreased.
• D) Estimated Returns Inventory is an income statement account.

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Definitions:

Governmental Fund

A type of fund used by government entities to account for activities that are financed through tax revenue and other governmental resources, focusing on fiscal accountability.

Capital Projects Fund

A fund used by governmental entities to finance major capital outlays, such as buildings, infrastructure, and other significant projects.

Financial Statements

Comprehensive reports that provide information about an organization's financial position, performance, and changes in financial condition.

Enterprise Fund

A fund typically used by government entities to account for operations financed by fees and charges for services provided.