Question

A corporation uses the perpetual inventory system. On May 1, it sells merchandise on account for $10,000 with terms 2/10, n/30 to a customer. The corporation had paid $6,000 to acquire the merchandise. On May 7, the customer returns merchandise with an invoice price of $1,000 to the corporation. The merchandise returned to the corporation had cost the corporation $600. On May 10, the corporation receives payment for the merchandise retained by the customer. The journal entry that the corporation records when it receives the payment from the customer on May 10 includes a

a) credit to cash for $8,820.
b) No answer text provided.
c) credit to cash for $9,000.
d) debit to cash for $8,820.
e) debit to cash for $9,000.
f) debit to cash for $8,816.

Answer 1

d) debit to cash for $8,820

Explanation:

The Journal entry is shown below:-

Cash Dr, $8,820 ($9,000 - 2% × $9,000)

To Accounts Receivable $8,820

(Being is recorded)

Here we debited the cash as increases the assets and credited the accounts receivable as it decreases the assets.

Working note:

Net sales = Sales - Sales returns

= 10,000 - $1,000

= $9,000