Question - Revenue recognition at time of sale. Marks and Spencer Group. Plc., a U.K. retailer, applies IFRS and reports its results in millions of pounds sterling (£). The notes to its financial statements for the year ended March 29, 2008, provide the following information:
• Revenue comprises sales of goods to customers less an appropriate deduction for returns and discounts. Marks and Spencer records revenues for sales of furniture and items purchased online upon delivery to the customer.
• Marks and Spencer records trade receivables at their nominal amount less an allowance for any doubtful accounts and sales returns. The beginning balance in the allowance for uncollectible accounts and sales returns was £1.1 million, and the ending balance was £3.3 million.
There were no recoveries of uncollectible accounts during the year.
For the year ended March 29, 2008, Marks and Spencer reported revenues (before discounts and returns) of £9,022.0 million. The cost of merchandise sold in 2008 was £5535.2 million. Assume that Marks and Spencer estimates discounts and returns of 1% of sales. Further assume that it made all sales on credit and that it estimates that 1.5% of revenue will be uncollectible.
a. What journal entry did Marks and Spencer record during the ar ended March 29, 2008, to recognize revenues and expenses?
b. What journal entry did Marks and Spencer make in the year ended March 29, 2008, to recognize sales returns and bad debts expense?
c. What wits the combined amount of sales returns and write-offs of uncollectible accounts during the year ended March 29, 2008?