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Global Company sold merchandise to Montana Industries for cash, $3,450. The cost of goods sold was $1,850. Global Company refunded Montana Industries $900 for returned merchandise. The cost of goods sold was $600. Which of the following will be recorded by Global Company in the journal entry for the refund from the cost of the sale?

a. Credit Estimated Returns Inventory, $600
b. Debit Estimated Returns Inventory, $900
c. Credit Inventory, $600
d. Debit Inventory, $900

1 Answer

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Final answer:

The journal entry to record the refund from the cost of the sale would be option d. Debit Inventory, $900.

Step-by-step explanation:

The journal entry to record the refund from the cost of the sale would be option d. Debit Inventory, $900.

When Global Company refunded Montana Industries $900 for returned merchandise, it will need to decrease the Inventory account because the merchandise is no longer part of the company's inventory. Debiting the Inventory account will decrease it by the amount of the refund, which is $900.

Therefore, the correct journal entry will be:

  1. Debit Inventory $900
  2. Credit Accounts Payable $900

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