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3 September, 01:33

On March 18, James Smith purchased $5,000 of furniture from Home Furnishings on account. The cost of the goods was $3,000. On March 20, Home Fu goods damaged in transit. Which of the following represents the correct way to record this tr rnishings granted the customer a $1,000 sales allowance for 1?

A. Refunds Payable 1,000 Cash 600 Merchandise Inventory 600 Estimated Returns Inventory 1,000

B. Refunds Payable O Accounts Receivable 1,000 1000

C. Sales Revenue O Cash 1,000

D. Sales Returns and Allowances1,000 Cash 1,000

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  1. 3 September, 04:33
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    B. Refunds Payable 1,000 Accounts Receivable 1000

    Explanation:

    Since the given transactions made on credit basis, so there is no role of cash.

    Hence, no cash entry would be recorded

    Moreover, the sales allowance is granted for $1,000 which reduce the account receive balance so we credited this account and the goods are damaged so we debited the refund payable account

    Hence, the entry would be

    Refunds Payable $1,000

    Accounts Receivable $1,000

    (Being the sales allowance is recorded)
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