Organic Gardens sells organic vegetable, fruit, and flower seeds and seedlings as well as organic bug and weed killers. They give customers a 90-day unconditional right of return if they are not satisfied with any of the products. On April 6, 2017, a customer purchased $1,500 of products (cost $750). Based on prior experience, Organic Gardens expects returns of 20%. Which of the following would be included in the journal entries to record the sale and cost of goods sold?

A : debit to Cash and a credit to Sales Revenue of $1,500.

B : credit to Cost of Goods Sold and debit to Inventory for $750.

C : credit to Refund Liability of $300 and a credit to Sales Revenue of $1,200.

D : credit to Estimated Inventory Returns of $150.

Question

Business

Ellen Meyer

1 September, 11:07

Organic Gardens sells organic vegetable, fruit, and flower seeds and seedlings as well as organic bug and weed killers. They give customers a 90-day unconditional right of return if they are not satisfied with any of the products. On April 6, 2017, a customer purchased $1,500 of products (cost $750). Based on prior experience, Organic Gardens expects returns of 20%. Which of the following would be included in the journal entries to record the sale and cost of goods sold?

A : debit to Cash and a credit to Sales Revenue of $1,500.

B : credit to Cost of Goods Sold and debit to Inventory for $750.

C : credit to Refund Liability of $300 and a credit to Sales Revenue of $1,200.

D : credit to Estimated Inventory Returns of $150.

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Answers (1)

Know the Answer?

Mohammed Vance · Answer 1

Answer: the correct answer is A. debit to cash and a credit to Sales Revenue of $1,500

Explanation:

It is debit to cash because the company receives $1,500 for the purchase and it is credit to revenue because it considers the amount of income a business generates with the sale.