B-Mart has a perpetual inventory system.B-Mart sells $5,000 of blue jeans.The customer later brings $600 of blue jeans back to B-Mart because they are defective.Those blue jeans had a cost of $200.The customer agrees to keep the blue jeans and B-Mart agrees to a $200 allowance.Which of the following is one of the entries that B-Mart will use to record the return?
A) Debit Accounts Receivable for $200 and credit Inventory for $200
B) Debit Inventory for $200 and credit Accounts Receivable for $200
C) Debit Accounts Receivable for $200 and credit Sales Returns & Allowances for $200
D) Debit Sales Returns & Allowances for $200 and credit Accounts Receivable for $200

Question

Quizplus · Accepted Answer

B-Mart needs to record the return by debiting the Sales Returns & Allowances account to reduce the amount of sales revenue and credit Accounts Receivable to adjust the customer’s balance. Therefore, the correct option is to Debit Sales Returns & Allowances for $200 and credit Accounts Receivable for $200. Option A and B are incorrect because they record the transaction as a return of inventory, while the customer decided to keep the defective jeans. Option C is incorrect because it only records the allowance, but not the return.

B-Mart Has a Perpetual Inventory System