On July 1,Ferguson Company Sold Merchandise in the Amount of $5,800

On July 1,Ferguson Company sold merchandise in the amount of $5,800 to Tracey Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Ferguson uses the perpetual inventory system and the gross method.On July 5,Tracey notifies Ferguson that some of the merchandise is defective.Ferguson agrees to a full refund for the items,and Tracey is allowed to keep the merchandise.The selling price of the merchandise is $500 and the cost of the merchandise is $350.The entry or entries that Ferguson must make on July 5 is:

A) $\begin{array}{|l|r|r|}\hline \text { Sales returns and allowances } & 500 & \\\hline \text { Accounts receivable } & & 500 \\\hline \text { Merchandise inventory } & 350 & \\\hline \text { Cost of goods sold } & & 350 \\\hline\end{array}$
B) $\begin{array}{|l|r|r|}\hline \text { Sales retums and allowances } & 500 & \\\hline \text { Accounts receivable } & & 500 \\\hline\end{array}$
C) $\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & 500 & \\\hline \text { Sales returns and allowances } & & 500 \\\hline\end{array}$
D) $\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & 500 & \\\hline \text { Sales returns and allowances } & & 500 \\\hline \text { Cost of goods sold } & 350 & \\\hline \text { Merchandise inventory } & & 350 \\\hline\end{array}$
E) $\begin{array}{|l|r|r|}\hline \text { Sales retums and allowances } & 350 & \\\hline \text { Accounts receivable } & & 350 \\\hline\end{array}$