Question

On October 1, Mutch Company sold merchandise in the amount of $5,800 to Carr Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Mutch uses the perpetual inventory system. On October 4, Carr returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Mutch must make on October 4 is:

Answer 1

Dr Sale returns and allowance 500

Cr Account receivable 500

Dr Merchandise inventory 350

Cr Cost of goods sold 350

Step-by-step explanation:

Since we were told that On October 4, Carr made a return of some of the merchandise in which the merchandize selling price was the amount of $500 while the cost of the merchandise returned was the amount of $350. This means that the Journal entry or entries in which Mutch must make on October 4 will be :

Dr Sale returns and allowance 500

Cr Account receivable 500

Dr Merchandise inventory 350

Cr Cost of goods sold 350