On October 1, Mutch Company sold merchandise in the amount of $5,800 to Carr Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Mutch uses the perpetual inventory system. On October 4, Carr 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 Mutch must make on October 4 is:
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question

Quizplus · Accepted Answer

Mutch must record the return of merchandise by debiting Sales Returns and Allowances for $500 and crediting Accounts Receivable for $500. Additionally, Mutch must debit Inventory for $350 and credit Cost of Goods Sold for $350 to account for the return of the merchandise.

On October 1, Mutch Company Sold Merchandise in the Amount