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5 May, 12:53

Dogs R US uses the perpetual inventory system to account for its merchandise. A customer returned merchandise. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, demonstrate the required journal entry of Dogs R US.

Debit Sales Returns/Allowances $400

Credit Accounts Receivable $400

Debit Merchandise Inventory $100

Credit Cost of Goods Sold $100

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  1. 5 May, 14:18
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    The journal entries are shown below:

    1. Sales return and Allowances A/c Dr $400

    To Account receivable A/c $400

    (Being the returned inventory is recorded)

    2. Merchandise inventory A/c Dr $100

    To Cost of Goods sold A/c $100

    (Being the cost of inventory is recorded)

    Since the merchandise inventory is returned for $400 and the same is recorded and together with the cost of the merchandise inventory is also recorded
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