Question

Jackson Company uses the perpetual inventory system. It sold merchandise to Jenny. After one month, Jenny returned $250 worth of the merchandise which had a cost of $150. Which of the following journal entries records the cost of merchandise returned?

a.A debit to Cost of Goods Sold of $150, a credit to Merchandise Inventory of $150

b.A debit to Merchandise Inventory of $150, a credit to Cost of Goods Sold of $150

c.A debit to Accounts Receivable of $250, a credit to Merchandise Inventory of $250

d.A debit to Accounts Receivable of $250, a credit to Sales Return and Allowances of $250

Answer 1

Correct answer-------------b.A debit to Merchandise Inventory of $150, a credit to Cost of Goods Sold of $150

.

Accounts receivable will be credited with $250 whereas Inventory will be debited by $150.

There will be two separate entries one will record receipt of goods return and other to record reduction in receivable balance due to return.

In first entry Cost of goods sold will be credited and inventory will be debited with $150.

In second entry Accounts receivable will be credited and sales return will be debited.