Question

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

Answer 1

Explanation:

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