On December 2,a customer returned merchandise,with a selling price of $1,400 purchased on account,to a department store.Ignoring cost of goods sold,which journal entry should the department store prepare? Assume no discounts were offered.
A)Debit Sales Revenue for $1,400 and credit Accounts Receivable for $1,400.
B)Debit Sales Revenue for $1,400 and credit Cash for $1,400.
C)Debit Sales Revenue for $1,400 and credit Sales Refunds Payable for $1,400.
D)Debit Sales Refunds Payable for $1,400 and credit Accounts Receivable for $1,400.

Question

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When merchandise is returned, the store must reverse the revenue and the receivable. Since the purchase was on account, the correct entry is to debit Sales Refunds Payable (or a similar account to reflect the obligation to return the customer's money or credit their account) and credit Accounts Receivable, indicating the reduction in the amount the customer owes.

On December 2,a Customer Returned Merchandise,with a Selling Price of $1,400