A customer who had purchased $25,000 worth of merchandise on account returns 20% of this order to the seller because he is not satisfied with the quality of the goods. How would this entry be recorded on the books of the seller if historically the seller has had very few returns of this nature?

Question

Quizplus · Accepted Answer

The journal entry to record the return would be to debit the accounts payable account (to reduce the amount owed to the vendor) and credit the inventory account (to reduce the inventory on hand). Since historically the seller has had very few returns of this nature, it is unlikely that there would be a separate contra account for sales returns and allowances, so option C (debit Accounts Payable, credit Inventory) is the best choice. Option A also has the correct debit and credit accounts, but the amounts listed in the answer do not match the amount in the question. Options B, D, and E list incorrect accounts or incorrect amounts.

A Customer Who Had Purchased $25,000 Worth of Merchandise on Account