Question

Garden Company sold merchandise to Mammoth Industries on account for $3,450 with terms 2/10, n/30. The cost of goods sold was $1,850. Garden Company refunded Mammoth Industries for returned merchandise worth $900. The cost of goods sold was $600. Which of the following will be recorded by Mammoth Industries in the journal entry for the return using the perpetual inventory system?

a. Credit to Accounts payable, $882
b. Debit to Accounts payable, $882
c. Credit to Merchandise Inventory, $882
d. Debit to Accounts payable, $600

Answer 1

c. Credit to Merchandise Inventory, $882

Step-by-step explanation:

The journal entry is shown below:

Cash A/c Dr $882

To Merchandise inventory A/c $882

(Being returned inventory is recorded)

The computation of the returned inventory is shown below:

= Amount of returned inventory - Discount of returned inventory amount

= $900 - $900 × 2

= $900 - $18

= $882

Hence, option c is correct