Question

QUESTION 49 On March 12. Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10. n/30. The cost of the items sold is $4.500. Klein uses the perpetual inventory system and the gross method of accounting for sales. On March 15, Babson returns some of the merchandise, which is not defective. The selling price of the returned merchandise is 5600 and the cost of the merchandise returned is $350. The entry or entries that Klein must make on March 15 is (are)

Answer 1

The required journal entry would be :

Date	Particulars	Debit ($)	Credit ($)
March 15	Sales returns and allowances	600
	Accounts receivable		600
	( To record return by customer)
March 15	Merchandise inventory	350
	Cost of goods sold		350
	(To reverse the cost of merchandise returned)

When the goods are returned, the amount owed by customer decreases, hence, credited to accounts receivable.

The merchandise returned which had already cost of goods sold debited needs to be reversed.