Question

On September 12, Ryan Company sold merchandise in the amount of $7,800 to Johnson Company, with credit terms of 3/10, n/30. The cost of the items sold is $5,000. Ryan uses the periodic inventory system and the net method of accounting for sales. On September 14, Johnson returns some of the non-defective merchandise, which is restored to inventory. The selling price of the returned merchandise is $700 and the cost of the merchandise returned is $450. The entry or entries that Ryan must make on September 14 is (are): Multiple Choice Sales returns and allowances 679 Accounts receivable 679 Merchandise inventory 437 Cost of goods sold 437 Sales returns and allowances 700 Accounts receivable 700 Sales returns and allowances 450 Accounts receivable 450 Sales returns and allowances 679 Accounts receivable 679 Sales returns and allowances 679 Accounts receivable 679 Merchandise inventory 450 Cost of goods sold 450

Answer 1

The journal entry to record sales return under net method (sales are recorded after deducting discount ) is as follows -

Sales returns and allowances A/c ....Dr 679

To Accounts receivables A/c 679

(700-3% =679)

Merchandise inventory A/c ....Dr 450

To COGS 450

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