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Rusty Hardware makes only cash sales. It began 2021 with a credit balance of $32,000 in the refund liability account. Sales during 2021 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2021, customers returned merchandise for credit of $28,000 to their accounts. What is the balance in the allowance for sales returns account at the end of 2021? a. $32,000. b. $39,000. c. $43,000. d. $40,000.

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Answer:

Ending Balance in allowance for Sales Return = $40,000

Explanation:

Ending Balance in allowance for Sales Return = Opening Allowance + Expected Sales Return - Actual Sales Return

Ending Balance in allowance for Sales Return = 32,000 + 600,000*6% - 28,000

Ending Balance in allowance for Sales Return = 32,000 + 36,000 - 28,000

Ending Balance in allowance for Sales Return = $40,000

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