Big Brother, a retail store, purchased 100 television sets from Krueger Electronics on account at a cost of $200 each. Kruger offers credit terms of 2/10, n/30; Big Brother uses a perpetual inventory system and records purchases at net cost. Big Brother determines that 10 of these television sets are defective and returns them to Krueger for full credit. In recording this return, Big Brother will:

Question

Quizplus · Accepted Answer

When Big Brother returns the defective television sets to Krueger, they will receive full credit for the purchase price, which was $200 each. Therefore, the total credit will be $2,000 (10 x $200). In this case, the return will decrease Big Brother's inventory, which was originally recorded at a cost of $200 per television set. Therefore, the correct journal entry would be to credit inventory for $2,000, which represents the reduction in the inventory due to the return.

Big Brother, a Retail Store, Purchased 100 Television Sets from Krueger