Question

Record the following transactions for Wheeler Company: Wheeler sold $2,000 of merchandise to Ellis Inc., terms...

Record the following transactions for Wheeler Company:
Wheeler sold $2,000 of merchandise to Ellis Inc., terms 2/10, n/30.
Eliis returned $400 of the merchandise to Wheeler.
Wheeler receives payment from Ellis.

I need help with this problem. I am not sure what entries to make with the sold merchandise and the return one.

I think that it would be

sold merchandise debit 2000

return sales and allowances credit  400?

Business   Accounting   
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Answer #1
DATE ACCOUNT TITLE DEBIT CREDIT
1 Accounts receivable 2000
Sales revenue 2000
[being sales made on account recorded]
2 Sales return and allowance 400
Accounts receivable 400
[Being merchandise returned]
3 There will be two cases ,whether payment is received within discount period or After discount period .If Payment is received within discount period of 10 days ,2% of Discount is available on net amount due from Ellis .
a) Payment is received Within Discount period
Cash 1568
Sales discount (1600*2%) 32
Accounts receivable (2000-400 returned) 1600
b) Payment is received after discount period
Cash 1600
Accounts receivable (2000-400) 1600
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