On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company on credit with terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the gross method of accounting for sales and a periodic inventory system. On September 14, Jepson returns some of the merchandise. The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Vander must make on September 14 is:

Question

Quizplus · Accepted Answer

Vander Company should make the following entry on September 14:
Accounts Receivable   500
Sales                             500
Cost of Goods Sold      350
Merchandise Inventory 350

This entry removes the revenue and cost associated with the returned merchandise. The net effect on sales is a reduction of $500, while the net effect on cost of goods sold is a reduction of $350.