Question

A customer returned merchandise purchased with cash with a sales price of $4,500. The cost of goods was $1,800. Which of the following represents the correct way to record this transaction? Select one: A. Sales Returns and Allowances 4,500 ​ Cash ​ 4,500 ​ ​ ​ Estimated Returns Inventory 1,800 ​ Merchandise Inventory ​ 1,800 B. Refunds Payable 4,500 ​ Sales Revenue ​ 4,500 ​ ​ ​ Merchandise Inventory 1,800 ​ Estimated Returns Inventory ​ 1,800 C. Refunds Payable 4,500 ​ Cash ​ 4,500 ​ ​ ​ Merchandise Inventory 1,800 ​ Estimated Returns Inventory ​ 1,800 D. Sales Revenue 4,500 ​ Cash ​ 4,500 ​ ​ ​ Merchandise Inventory 1,800 ​ Cost of Goods Sold ​ 1,800

Answer 1

D. Sales Revenue 4,500 ​ Cash ​ 4,500 ​ ​ ​ Merchandise Inventory 1,800 ​ Cost of Goods Sold ​ 1,800

Step-by-step explanation:

The sale of inventory usually results in the posting of 4 entries, a pair of entries for revenue recognition and another pair for the recognition of the cost of the goods sold. these entries are

Debit Cash/Accounts receivable

Credit revenue

To recognize sales and ;

Debit cost of sales

Credit Inventory

To recognize the cost of the items sold.

When returns are made for items sold to a customer the reversing entries are posted into the reverse of what had earlier been posted.