Merchandise with a list price of $3,800 and costing $2,000 is sold on account, subject to the...
Question:
Merchandise with a list price of $3,800 and costing $2,000 is sold on account, subject to the following terms: FOB shipping point, 2/10, n/30. The seller prepays the $50 shipping charges and bills the customer, (seller pays Cash).
Prior to paying for the goods, the seller issues a credit memorandum for $800 to the customer for merchandise costing $500 that is returned.
The correct amount is received within the discount period.
Record the foregoing transactions of the seller in the sequence indicated below.
(a) Sold the merchandise, recognizing the sale and cost of merchandise sold.
(b) Paid the transportation charges.
(c) Issued the credit memorandum.
(d) Received payment from the customer.
What Are Sales Returns:
A company's Sales Returns and Allowances account is presented as a contra revenue account and carries a debit balance. The Sales Returns and Allowance account is debited whenever customers return merchandise previously sold by the company.
Answer and Explanation: 1
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| Account | Dr | Cr |
|---|---|---|
| Accounts receivable | 3,800 | |
| Sales | 3,800 | |
| Cost of goods sold | 2,000 | |
| Inventory | 2,000 |
b.
| Account | Dr | Cr |
|---|---|---|
| Freight out | 50 | |
| Cash | 50 |
c.
| Account | Dr | ... |
|---|
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Sales Returns & Allowances Journal Entries
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Chapter 7 / Lesson 33
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Sales returns and allowances must be properly tracked by accounting using journal entries. Review the process for recording sales returns and allowances with examples.
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