Question

Problem 1 (20 points) After the amount due on a sale of $28,000, terms 2/10, n/eom, is received from a customer within the discount period, the seller consents to the return of the entire shipment for a cash refund. The cost of the merchandise returned is $ 16,800. Record the journal entries for (a) the sale (b) payment within the discounted period (c) the return of inventory and (d) the cash refund from the perspective (view) of the seller and buyer. If no entry is required, please leave blank Seller Description Debit Credit Date

Answer 1

Debits Credits Journal entries in Seller books :- Date Accounts Title & Explanation a) XX-XX-XXXX Accounts Receivable To Sales Revenue (Entry for sale of merchandise) 28,000 28,000 27,440 560 b) XX-XX-xxxx Cash (28000*98%) Sales discount (28000*2%) To Accounts Receivable (Entry for collection of cash due within discount period) 28,000 28,000 c) XX-XX-XXXX Sales Returns and allowances To Sales discounts To Cash (Entry for return of goods sold) 560 27,440 16,800 XX-XX-XXXX Merchandising inventory To Cost of goods sold (Entry for return of inventory sold) 16,800 Debit S Credits Journal entries in Buyer books :- Date Accounts Title & Explanation a) XX-XX-XXXX Merchandising inventory To Accounts Payable (Entry for purchase of merchandise) 28,000 28,000 28,000 560 b) XX-XX-XXXX Accounts Payable To Purchase discount (28000*2%) To Cash (Entry for payment of cash due within discount period) 27,440 27,440 560 c) XX-XX-XXXX Cash Purchase discount To Merchandising inventory (Entry for return of goods purchased) 28,000 Cash refund from prespective of seller is = (28000-(280002%)) - $ 27,440/. Cash refund from prespective of buyer is = (28000-(28000*2)) = $ 27,440/.