On July 10, 2017, Pearl Music sold CDs to retailers on account and recorded sales revenue of $743,000 (cost $638,980). Pearl grants the right to return CDs that do not sell in 3 months following delivery. Past experience indicates that the normal return rate is 15%. By October 11, 2017, retailers returned CDs to Pearl and were granted credit of $78,900.
Prepare Pearl's journal entries to record (a) the sale on July 10, 2017, and (b) $78,900 of returns on October 11, 2017, and on October 31, 2017. Assume that Pearl prepares financial statement on October 31, 2017