On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Co

Question

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 net 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 $600 and the cost of the merchandise returned is $350. The entry(ies) that Klein must make on March 15 is (are):

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Sales returns and allowances 588 Accounts receivable 588 Merchandise inventory 350 Cost of goods sold 350

Explanation / Answer

Journal entry :

So answer is a)

Date accounts & explanation debit credit Mar 15 Sales return and allowance (600*98%) 588 Account receivable 588 Merchandise inventory 350 Cost of goods sold 350

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