On October 1, Courtland Company sold merchandise in the amount of $5,800 to Carter Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Courtland uses the periodic inventory system. On October 4, Carter returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Courtland must make on October 4 is:

Question

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On October 4, Courtland must make the following entry:
Accounts Receivable | Carter Company - $500
Sales Returns and Allowances - $500
(To record the return of merchandise by Carter Company)

Inventory | Merchandise - $350
Cost of Goods Sold - $350
(To remove the cost of the returned merchandise from cost of goods sold)

On October 1, Courtland Company Sold Merchandise in the Amount