There are various appropriate accounting treatments when a sale is made subject to a right of return.These methods include:
A) Recording the sale and accounting for the returns as they occur in future periods.
B) Recording the cash received as held in trust until all return privileges have expired.
C) Recording the sale but reducing sales by an estimate of the future returns.
D) Recording the sale and accounting for the returns as they occur in future periods and recording the sale but reducing sales by an estimate of the future returns.
E) All of the given answers.

Question

Quizplus · Accepted Answer

This option combines both methods of accounting for returns - recording the sale and accounting for returns as they occur, as well as reducing sales by an estimate of future returns. By doing so, the financial statements will reflect the most accurate representation of revenue and any potential returns. Option A only accounts for returns as they occur and does not consider potential returns. Option B is not a generally accepted accounting principle and is overly conservative. Option C only accounts for potential returns and does not recognize actual returns as they occur. Option E is incorrect as it includes all options, including the overly conservative option B.

There Are Various Appropriate Accounting Treatments When a Sale Is