Accounting for exchange offer
Atharv Sankliya (1356 Points)
05 April 2023
what are the journal entries and accounting treatment for exchange offer in a mobile/electronic shop
6 Replies
Yasaswi Gomes new
(Finance )
(4545 Points)
Replied 06 April 2023
Company sells mobile for 100 and profit margin is 50. The customer returns it back for exchange and buys a mobile worth 200 where the profit margin is 100. Customer mobile after usage is valued at 30. So the profit is now 30. If the company has only two mobiles made and sold, the entries will be
Dr. Inventory 400
Cr. Income statement 400
After exchange
Dr. Inventory 230
Cr. Income statement 230.
Then to assess the profitablity
Dr. Exchange loss 170
Cr. Receivablez 170
For cash sales
Dr. Exchange loss/ salez 170
Cr. Bank. 170 bank because you spent money from bank on productuion.
Sale can be recorded as
Dr. Inventory 30
Cr. Sales 30
Because sales is recorded at net of taxes and discounts.
I hope i got it right.
Yasaswi Gomes new
(Finance )
(4545 Points)
Replied 06 April 2023
Ive modified it please check and comment
Yasaswi Gomes new
(Finance )
(4545 Points)
Replied 06 April 2023
Company sells mobile for 100 and profit margin is 50. The customer returns it back for exchange and buys a mobile worth 200 where the profit margin is 100. Customer mobile after usage is valued at 30. So the profit is now 0. If the company has only two mobiles made and sold, the entries will be
Dr. Inventory 200
Cr. Income statement 200 inventory valued at cost.
After exchange
Dr. Inventory 130
Cr. Income statement 130 inventory valued at cost
Then to assess the profitablity
Dr. Exchange loss 70
Cr. Receivablez 70
For cash sales
Dr. Exchange loss/ salez 70
Cr. Bank. 70 bank because you spent money from bank on production. This bank entry is a depiction.
Sale can be recorded as
Dr. Inventory 30
Cr. Sales 30
Because sales is recorded at net of taxes and discounts.
I hope i got it right. But what happened to the profit margin? Thats because we sell inventory at cost for profit and sales will be impacted but no impact on tax losses. Now im ready for opprobrium.
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