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 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.
Assume that for the year ended March 29, 2013, Marks and Spencer reported revenues (before discounts and returns) of £9,022.0 million. The cost of merchandise sold in 2013 was £5,535.2 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 revenues will be uncollectible.
a. What journal entry did Marks and Spencer record during the year ended March 29, 2013, to recognize revenues and expenses? If an amount box does not require an entry, leave it blank. Enter all amounts in millions, to one decimal place.
b. What journal entry did Marks and Spencer make in the year ended March 29, 2013, to recognize sales returns and bad debts expense? If an amount box does not require an entry, leave it blank. Enter all amounts in millions, round to two decimal places.
c. What was the combined amount of sales returns and write-offs of uncollectible accounts during the year ended March 29, 2013? If required, round your answers to two decimal places. Enter a subtraction as a negative number.
Marks and Spencer Group, Plc. Total Sales Returns and Write-offs For the Year Ended March 29, 2013 £ Total Returns and Write-offs£