On August 1, Olivera Company sold merchandise in the amount of $4,600 to Wyne, with credit terms...
Question:
On August 1, Olivera Company sold merchandise in the amount of $4,600 to Wyne, with credit terms of 3/10, n/30. The cost of the items sold is $3,700. Olivera uses the perpetual inventory system. On August 4, Wyne returns some of the merchandise. The selling price of the merchandise is $460 and the cost of the merchandise returned is $370.
The entry or entries that Olivera must make on August 4 is:
a. Dr. Sales returns and allowances, $370; Cr. Accounts receivable, $370.
b. Dr. Sales returns and allowances, $460; Cr. Accounts receivable, $460.
c. Dr. Accounts receivable, $460; Cr. Sales returns and allowances, $460.
d. Dr. Sales returns and allowances, $460; Cr. Accounts receivable, $460; Dr. Merchandise inventory, $370; Cr. Cost of goods sold, $370.
e. Dr. Accounts receivable, $460; Cr. Sales returns and allowances, $460; Dr. Cost of goods sold, $370; Cr. Merchandise inventory, $370.
Sales Returns and Allowances:
Sales Returns and Allowances is a contra-revenue account that is used to record reductions in the sales revenue recorded. The account has a normal debit balance, which means that it increases on the debit side.
Answer and Explanation: 1
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| a. Dr. Sales returns and allowances, $370; Cr. Accounts receivable, $370. | No, the gross... |
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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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