Ganes Computing sold $70,000 of inventory on account to Markel Company on April 1,20X3.The company uses a periodic inventory system.Markel Company returned $2,000 of the inventory on April 20,20X3 because it did not fit the company's needs.Which of the following is the journal entry to be made by Ganes Computing for the return of inventory?

Question

Quizplus · Accepted Answer

Since the company uses a periodic inventory system, the inventory return needs to be recorded as a reduction in sales revenue and an increase in the sales returns and allowances account. Therefore, the correct journal entry would be to debit the Sales Returns and Allowances account (reducing revenue) and credit Accounts Receivable (reversing the original sale). Option E correctly reflects this. Options A, B, C, and D do not record the inventory return properly.

Ganes Computing Sold $70,000 of Inventory on Account to Markel Cash $2,000 Accounts Receivable $2,000\begin{array} { l l l } \text { Cash } & \$ 2,000 & \\\quad\text { Accounts Receivable } & &\$ 2,000 \\\end{array} Cash Accounts Receivable ​$2,000​$2,000​

Ganes Computing Sold $70,000 of Inventory on Account to Markel $\begin{array} { l l l } \text { Cash } & \$ 2,000 & \\\quad\text { Accounts Receivable } & &\$ 2,000 \\\end{array}$