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8 July, 13:56

On October 5, Cullumber Company buys merchandise on account from Oriole Company. The selling price of the goods is $6,370, and the cost to Oriole Company is $3,420. On October 8, Cullumber Company returns defective goods with a selling price of $680 and a scrap value of $440.

Record the transactions of Cullumber Company, assuming a perpetual approach.

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  1. 8 July, 14:09
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    On October 5

    Debit Accounts receivable $6,370

    Credit Sales Revenue $6,370

    Debit Cost of goods sold $3,420

    Credit inventory account $3,420

    October 8

    Debit Sales Revenue (Sales return) $680

    Credit Accounts receivable $680

    Debit Inventory account $440

    Credit Cost of goods sold $440

    Explanation:

    When goods are on account, the entries required are

    Debit Accounts receivable

    Credit Sales Revenue

    To record the amount made from sales. Furthermore, there is a reduction in inventory. This will also be accounted for by

    Debit Cost of goods sold

    Credit inventory account

    When returns are made, the debits and credits above are reversed.
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