Question

Global Company sold merchandise to Montana Industries for cash, $3,450. The cost of merchandise sold was $1,850. Global Company refunded Montana Industries $900 for returned merchandise. The cost of merchandise sold was $600. Which of the following will be recorded by Global Company in the journal entry for the refund from the sale?
A. debit to Customer Refunds Payable, $900
B. credit to Accounts Receivable, $600
C. credit to Customer Refunds Payable, $900
D. debit to Cash, $600

Answer 1

Answer:

C. credit to Customer Refunds Payable, $900  

Explanation:

Global Company sold merchandise to Montana Industries for cash, $3,450. The cost of merchandise sold was $1,850.

Global Company refunded Montana Industries $900 for returned merchandise. The cost of merchandise sold was $600.

The entry that will be recorded by Global Company in the journal entry for the refund from the sale a credit to Customer Refunds Payable, $900  

This amount of $900 will eventually be netted off against the accounts receivable amount for the total sales of $3,450, reducing the amount payable by the customer to $2550