On July 10, 2020, Waterway Ltd. sold GPS systems to retailers on account for a selling price of $780,000 (cost $624,000).

 On July 10, 2020, Waterway Ltd. sold GPS systems to retailers on account for a selling price of $780,000 (cost $624,000). Waterway grants the right to return systems that do not sell in three months following delivery. Past experience indicates that the normal return rate is 15%. By October 11, 2020, retailers returned systems to Waterway and were granted credits of $74,000. The company follows IFRS.

Prepare Waterway’s journal entries to record the sale on July 10, 2020. 

Prepare Waterway’s journal entries to record the $74,000 of actual returns on October 10, 2020. (Hint: Use Accounts Payable for the amount returned.)

Answer.