Question

Organic Gardens sells organic vegetable, fruit, and flower seeds and seedlings as well as organic bug and weed killers. They give customers a 90-day unconditional right of return if they are not satisfied with any of the products. On April 6, 2017, a customer purchased $1,500 of products (cost $750). Based on prior experience, Organic Gardens expects returns of 20%. Which of the following would be included in the journal entries to record the sale and cost of goods sold?

A : debit to Cash and a credit to Sales Revenue of $1,500.
B : credit to Cost of Goods Sold and debit to Inventory for $750.
C : credit to Refund Liability of $300 and a credit to Sales Revenue of $1,200.
D : credit to Estimated Inventory Returns of $150.

Answer 1

Answer: the correct answer is A. debit to cash and a credit to Sales Revenue of $1,500

Step-by-step explanation:

It is debit to cash because the company receives $1,500 for the purchase and it is credit to revenue because it considers the amount of income a business generates with the sale.