Franklyn Publishing Company is marketing a new principles of accounting text.The new text is quite revolutionary in its approach.The use of the new approach raises some question as to the marketability of the text,however.
On July 31,2014,Franklyn sold 5,000 copies of the new text to college bookstores at a unit price of $60.The textbooks have a unit cost to Franklyn of $40.Franklyn uses a perpetual inventory system.The company's accounting period ends on December 31.
In view of the uncertainty regarding the marketability of the text,Franklyn sold the text with terms of net 30 days,but has allowed the bookstores until January 31,2015,to return any unsold texts for a cash refund.Franklyn has no means of estimating the number of texts that will be returned.
On September 12,2014,Franklyn collected $260,000 on the account receivable.On November 15,2014,350 texts were returned by the bookstore to Franklyn.
Required:
1.Prepare the appropriate journal entries for each of the dates given above.
2.Explain the appropriate treatment on the financial statements of any accounts unique to this sales transaction.
3.Provide authoritative support for the journal entries you made in part 1 above both for public and private companies.

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The Answer of Franklyn Publishing Company is marketing a new principles of accounting text.The new text is quite revolutionary in its approach.The use of the new approach raises some question as to the marketability of the text,however.
On July 31,2014,Franklyn sold 5,000 copies of the new text to college bookstores at a unit price of $60.The textbooks have a unit cost to Franklyn of $40.Franklyn uses a perpetual inventory system.The company's accounting period ends on December 31.
In view of the uncertainty regarding the marketability of the text,Franklyn sold the text with terms of net 30 days,but has allowed the bookstores until January 31,2015,to return any unsold texts for a cash refund.Franklyn has no means of estimating the number of texts that will be returned.
On September 12,2014,Franklyn collected $260,000 on the account receivable.On November 15,2014,350 texts were returned by the bookstore to Franklyn.
Required:
1.Prepare the appropriate journal entries for each of the dates given above.
2.Explain the appropriate treatment on the financial statements of any accounts unique to this sales transaction.
3.Provide authoritative support for the journal entries you made in part 1 above both for public and private companies.

Franklyn Publishing Company Is Marketing a New Principles of Accounting